The UK arm of Santander said today that it had set aside more than half a billion pounds to cover the costs of mis-selling payment protection insurance to its customers.

Chief executive Ana Botin said the £538m charge hit the bank’s financial results in the six months to June, but still hailed its "strong track record of profitability".

The British arm of the Spanish banking giant saw pre-tax profits dip 3% to £1.2bn in the six months to June as higher regulatory costs dented earnings. Profits after tax and the PPI charge were £300m.

The hit comes after the High Court decided that new rules on the mis-selling of PPI could be applied retrospectively and the British Bankers’ Association pulled an appeal against the decision.