UK bank Bradford & Bingley returns to H1 profit

* Mortgage arrears fall from year earlier

* Costs down to 59 mln stg vs 65 mln a year ago

* H1 pretax profit 896 mln stg vs 160 mln loss

* Lending arrears down 18 pct in H1

(Adds detail, background)

LONDON, July 30 (Reuters) - Bradford & Bingley (BB_p.L), the UK mortgage lender which was nationalised after running into problems during the credit crisis, said on Friday it had swung to a first-half profit after making a loss a year earlier.

The bank reported a pretax profit of 896 million pounds ($1.4 billion) for the six months ending June 30, having made a loss of 160 million a year earlier.

Lower costs and mortgage arrears helped boost Bradford & Bingley's earnings, with operating costs falling to 59 million pounds from 65 million.

In 2008, Spanish bank Santander (SAN.MC) took control of Bradford & Bingley's retail branches and savings accounts, while the rest of the company's business -- including its mortgage book -- was taken into public ownership by the British government.

Next week Northern Rock Plc, which was the first British bank to be nationalised during the credit crisis, posts interim results along with the UK's largest banks Barclays (BARC.L), HSBC (HSBA.L), Royal Bank of Scotland (RBS.L) and Lloyds (LLOY.L). (Reporting by Sudip Kar-Gupta; Editing by David Holmes) ($1=.6402 Pound)