Nationwide Building Society, one of the UK's three biggest mortgage providers, reported a 17% drop in first-half profit as it booked a charge for asset write-offs and technology investments.
The lender said it took a charge of £135m for the six-month period.
This came as it invests in technology to improve its services amid rising competition for savings deposits from traditional incumbent players and new upstart digital banks.
Nationwide is a bellwether for the UK home loan market with its 13% mortgage share.
It said its net interest margin fell to 1.27% in the months from April to September, from 1.34% the same time a year ago, amid intense competition among lenders.
UK banks have in recent months reported tightening margins, as new players entering the market and contracting demand for home loans have squeezed the rates lenders can charge.
Nationwide said its statutory profit was £516m in the first half of its financial year, down from £628m the same time a year ago but in line with expectations.
Unlike rival listed banks such as Lloyds and Barclays which have a goal of delivering ever higher profits to their shareholders, Nationwide operates as a society owned by its customers.
It has said it will be comfortable keeping annual profits at between £0.9-1.3 billion a year.
The lender said fears about the impact of Britain's exit from the European Union have held back investment.
"Consumer confidence and activity in the housing market are more subdued than what you'd expect," Nationwide's chief economist Robert Gardner said.
Nationwide said it will press ahead with plans to launch a business current account regardless of whether it wins funding for the scheme from a fund set up by Royal Bank of Scotland to fulfil the conditions of its 2008 crisis-era bailout.
That represented a change in Nationwide's previous stance on the topic when it said it would only launch the business account if it succeeds in its application for the funding.