TSB announces Q1 2018 results – we’re putting things right

Last weekend, TSB moved its five million customers and their 1.3 billion records to its new banking platform.

  • Over the past week, TSB customers have had problems in accessing their accounts via TSB’s website and mobile app. 
  • TSB teams are working around the clock to fix these issues as soon as possible.
  • In addition, Sabadell and TSB have appointed IBM in a Systems Integration role, to help identify and resolve performance issues in the platform.  In this role IBM will report to the TSB CEO.
  • No TSB customer will be left out of pocket as a result of these issues – to begin to put this right we will be waiving all overdraft fees and interest charges for all of our retail and small business customers for April.
  • As a way of saying thank you to our customers for sticking with us, we’ll be increasing the interest rate on our Classic Plus account to 5% AER.

Paul Pester, TSB Chief Executive Officer, says:  “As we moved over to our new banking platform last weekend, the landing was an incredibly bumpy one for our customers, and for that I am truly sorry.  This is not the level of service that we pride ourselves on providing – nor is it what our customers have come to expect from TSB.

“Our teams continue to work around the clock to fix the problems that some of our customers are having in accessing their TSB accounts.  I want to reassure our customers that the engine room of the bank is working as it should.  This means that for the vast majority of our five million customers, everything is running smoothly.

“The challenge we are facing at the moment is that while we know it’s working, one of the main ways that our customers see everything is working – through our internet banking and mobile app – isn’t functioning as well as it should be, and I can appreciate how frustrating this must be for our customers. 

“Of course, customers can rest assured that no one will be left out of pocket as a result of these problems.  To begin to put things right, we will be waiving all overdraft fees and interest charges for all of our retail and small business customers for April.

“We have achieved a tremendous amount in the past four years in building TSB.  We clearly have some issues we’re dealing with but we will come out the other side.  The way we deal with every single one of our frustrated customers as quickly as possible will define TSB – both now and in 10, in 15 and in 20 years to come as we continue on our mission to bring more competition to UK banking.”

Financial results in the quarter were:

  • TSB advanced £1.2 billion of new mortgage loans in the first quarter of 2018, building on the £7.0 billion advanced in 2017.
  • Total customer lending at £30.8 billion is down 0.3% year-on-year due to the effect of the early return of the Mortgage Enhancement and the continued roll-off of the Whistletree portfolio.  The mortgage portfolio loan-to-value remained low at 44.2%.
  • Franchise customer lending (excluding the Whistletree portfolio) grew to £28.8 billion, up 7.9% (£2.1 billion) year-on-year from £26.7 billion.
  • 6.6%[1] of all customers switching banks or opening a new account in the past year chose TSB, on average, around 750 customers a day opened a new bank account with TSB during the quarter.
  • Customer deposits grew to £30.6 billion, up 3.0% (£0.9 billion) year-on-year from £29.7 billion.
  • Operating costs increased 2.3% year-on-year to £207.5 million primarily due to increased outsourcing fees paid to Lloyds Banking Group.
  • Management profit before tax grew to £29.5 million, up by 5.4% (£1.5 million) year-on-year from £28.0 million.

o   As previously reported, the Mortgage Enhancement portfolio – a £3.4 billion residential mortgage loan book created in February 2014 to enhance TSB’s profitability – was returned early, in June 2017.  This portfolio earned £9.5 million profit before tax in the first quarter of 2017 which, consequently, was not generated in 2018.

o   Management profit before tax (Franchise including Whistletree), excluding the effect of the early return of the Mortgage Enhancement portfolio, grew £11.0 million year-on-year (59.5%) from £18.5 million to £29.5 million.

  • Statutory profit before tax fell to £19.3 million, down 39.3% (£12.5 million) from £31.8 million primarily due to temporary movements in normal hedging arrangements, in turn driven by market rate fluctuations, and which will unwind in the future[2].
  • TSB’s liquidity is robust while our capital position remains one of the strongest of the UK banks with a fully loaded common equity tier one ratio of 19.8%3.


Financial Results

Balance sheet and capital   At 31 Mar


At 31 Dec


At 31 Mar



Vs. Dec 17



Vs. Mar 17

Franchise customer lending – excluding Whistletree (£ million)   28,792.9 28,744.8 26,691.1 0.2% 7.9%
Franchise customer lending – including Whistletree

(£ million)

  30,801.4 30,854.2 29,113.9 (0.2)% 5.8%
Mortgage Enhancement customer lending (£ million)   1,764.7 n/a n/a
Total customer lending (£ million)   30,801.4 30,854.2 30,878.6 (0.2)% (0.3)%
Total customer deposits (£ million)   30,584.7 30,520.6 29,692.2 0.2% 3.0%
Group loan to deposit ratio   100.7% 101.1% 104.0% (0.4)pp (3.3)pp
Common Equity Tier 1 capital ratio (fully loaded)   19.8% 20.0% 18.1% (0.2)pp   1.7pp

Financial performance


Q1 2018

Q4 2017 Q1 2017 Change

Vs. Q4 17



Vs. Q1 17

Franchise profit before tax – including Whistletree (£ million)   29.5 34.1 18.5 (13.5)% 59.5%
Mortgage Enhancement profit before tax (£ million)   9.5 n/a n/a
Management profit before tax1 (£ million)   29.5 34.1 28.0 (13.5)% 5.4%
Other one-off items(£ million)   (3.5) (2.9) (3.4) 20.7% 2.9%
Banking volatility(£ million)   (6.7) (2.7) 7.2 148.1% (193.1)%
Statutory profit before tax (£ million)   19.3 28.5 31.8 (32.3)% (39.3)%
Group banking net interest margin4   3.00% 3.03% 3.05% (3)bps (5)bps
TSB asset quality ratio5   0.27% 0.27% 0.28%         0bps (1)bps
Operating costs (management basis)1 (£ million)   207.5 208.9 202.8 (0.7)% 2.3%

Author: Yash Hirani

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