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TSB returns to growth with a renewed focus on customers

26th July 2019


Financial highlights

  • Statutory profit before tax in H1 2019 was £21.1 million versus a loss of £107.4 million in H1 2018.
  • Management profit before tax, excluding IT migration costs, of £57.6 million decreased by 27.9% versus H1 2018, largely due to pressures on margins and higher costs of regulatory programmes.
  • Total customer deposits increased by £0.7 billion (2.6%) to £29.8 billion in H1 2019 and reflected a successful ISA season and continued confidence in the TSB franchise.
  • TSB provided over £2.9 billion of new mortgage advances to c.20,000 homeowners in H1 2019.
  • Total loans to customers increased by £0.4 billion (1.2%) to £30.4 billion in H1 2019.
  • Being selected for the Incentivised Switching Scheme, launched in February, has helped to open 6.5k new business current accounts and Small to Medium Enterprise (SME) savings balances increase by 25% in the first half of 2019.
  • TSB's liquidity is robust, with a loan to deposit ratio of 101.7%, while its capital position remains one of the strongest of the UK banks with a Common Equity Tier 1 capital ratio of 20.0%. TSB successfully issued £750 million of covered bonds in Q1 2019.
  • TSB's new ‘industry leading’ Fraud Refund Guarantee will better protect customers that are innocent victims of fraud on their TSB account.
  • TSB now has over five million customers, including 3.8 million current accounts.

Debbie Crosbie, TSB’s Chief Executive Officer, says: “TSB has begun a new chapter, underpinned by improving business performance and strong fundamentals.

“We are beginning to see the benefits of our new platform for our customers, including a faster mortgage applications process and the introduction of new digital capabilities like identity verification on our mobile app.

“Since joining the business in May, I have been incredibly impressed by the commitment and passion my colleagues have to serve our customers, and I firmly believe that TSB has all the right capabilities to be the leading UK challenger bank. My priority, along with my new Executive Team, will be to renew our focus on our customers and create our three-year strategy. This work is well underway, and we will share full details later this year. These results show we’re already on our way to building on our strengths to shape TSB’s future success.”

Financial Results

Balance sheet and capital (£ million) At 30 June 2019 At 31 Dec 2018 At 30 June 2018 Change vs Dec 2018 Change vs June 2018
Customer lending - excluding Whistletree 28,769.1 28,267.3 29,105.0 1.8% (1.2)%
Total customer lending 30,367.8 30,008.5 31,023.7 1.2% (2.1)%
Total customer deposits 29,848.9 29,084.3 29,576.9 2.6% 0.9%
Group loan to deposit ratio 101.7% 103.2% 104.9% (1.5)pp (3.2)pp
Common Equity Tier 1 capital ratio 20.0% 19.5% 19.2% 0.5pp 0.8pp
Financial performance (£ million) H1 2019 H2 2018 H1 2018 Change vs H2 2018 Change vs H1 2018
Management profit before tax - excl. migration costs 57.6 93.4 79.9 (38.3)% (27.9)%
Additional post-migration charges (36.2) (153.8) (176.4) 76.5% 79.5%
Reimbursement of additional post-migration charges - 53.0 100.0    
Management profit/(loss) before tax 21.4 (7.4) 3.5   511.4%
Migration related income from LBG - - 318.3    
Costs of preparing for TSB's migration - 1.0 (418.3)    
Banking volatility1 5.2 (0.3) (8.5)    
Other one-off items (5.5) 8.7 (2.4)   (129.2%)
Statutory profit/(loss) before tax 21.1 2.0 (107.4) 955.0%  
Net interest margin2 2.76% 2.92% 2.82% (16)bps (6)bps
TSB asset quality ratio3 0.16% 0.20% 0.27% (4)bps (11)bps

1Banking volatility reflects gains and losses on derivatives not in hedge accounting relationships, hedge accounting ineffectiveness, and volatility associated with share schemes.
2Management basis net interest income divided by average loans and advances to customers, gross of impairment allowance.
3Impairment charge on loans and advances to customers divided by average loans and advances to customers, gross of impairment allowance.

Financial performance

  • TSB's statutory profit before tax for H1 2019 was £21.1 million, versus a loss of £107.4 million in H1 2018, which reflected the non-recurrence of costs to deliver TSB’s IT migration, and a significant reduction in the costs of the post migration service disruption in 2018.
  • Management profit excluding migration costs reduced by 27.9% to £57.6 million compared to H1 2018. The main drivers were as follows:
    • lower overall net interest income due to competitive pressure on mortgage margins and a lower mix of higher margin unsecured lending;
    • increased costs from a number of regulatory focused initiatives; partly offset by
    • lower levels of provisions for loan impairment losses.
  • Net interest margin at 2.76% was down 6bps from 2.82% in H1 2018, primarily reflecting mortgage margin compression given the competitive environment and the lower mix of unsecured lending, mitigated in part by the effect of waiving overdraft interest in H1 2018.
  • Total customer deposits increased £0.7 billion (2.6%) in H1 2019 to £29.8 billion. This reflects a successful ISA season, generating an additional £0.5 billion of new ISA balances and continued growth in personal current account balances.
  • Total loans to customers increased £0.4 billion (1.2%) in H1 2019 to £30.4 billion. The Bank helped c.20,000 customers to buy their own home or re-mortgage onto a better rate with TSB.
  • Mortgages (excluding Whistletree1) returned to growth, partially offset by reductions in unsecured lending and the expected continued run-off of the closed Whistletree book.
  • The mortgage portfolio loan-to-value remained conservative at 44.0% (excluding the Whistletree portfolio).
  • Common Equity Tier 1 capital ratio and liquidity coverage ratio remained very strong at 20.0% and 299.8% respectively, with the loan to deposit ratio at 101.7%.

Business performance

  • The mortgage application process is now significantly quicker, and bank accounts are opened in half the time in branch.
  • TSB is taking the lead to fight fraud and safeguard its customers. TSB’s Fraud Refund Guarantee better protects customers that are innocent victims of fraud and sits alongside TSB’s programme to help educate communities right across the UK to prevent fraud. Over 100 local fraud workshops have already been hosted, which have been attended by more than 5,600 people. TSB is also working closely with local police forces to catch and prosecute criminals that target its customers. This work has been widely acclaimed by Government, NGOs and opinion formers.
  • TSB is leveraging the new platform to enhance the customer experience, facilitating the roll-out of the Image Clearing System for cheques across the branch network, and updating its latest mobile app to include new features such as offering a new way of confirming customers’ identities remotely via ‘selfies’.
  • TSB's mobile app usage has increased during the first half of the year with a 10% increase in mobile app users (compared to December 2018). The mobile app store ratings have also significantly improved, with a 4.8 and 4.67 star customer rating (out of five) on the App Store and on Google Play respectively.
  • SME customers have access to a faster digital service that has reduced the average time for onboarding; a new mobile banking app; and a market-leading business savings account.
  • IT incidents are in line with the industry. We’ve addressed all customer complaints in relation to migration and new customer complaints are at industry levels.
  • TSB's NPS is back in positive territory at +7.42.
  • The Executive team includes three new appointments that will help accelerate plans to transform and improve TSB: Customer Banking Director Robin Bulloch; Chief Operating Officer Suresh Viswanathan; and Human Resources Director Liz Ashford. They will join, subject to regulatory approval, in Q3 2019.
  • TSB continues to make good progress optimising our technology services allowing greater cost effectiveness and further innovation.


GDP growth is expected to be flat in the second quarter of the year3 and the UK economic and market conditions continue to remain challenging and uncertain. The UK’s pending exit from the EU and an ongoing low interest rate environment all contribute to ongoing ambiguity for financial markets and businesses. TSB is one of the most strongly capitalised banks in the country and, by maintaining a healthy liquidity reserve, is well placed to weather economic volatility or shocks.

In the second half of the year, TSB will continue to focus on business improvement and deliver a long-term plan for growth. The key priorities for the business in the meantime will be: to continue to serve customers brilliantly, helping them with all their banking needs; to leverage the new technology platform to offer advanced ways of banking; and to maintain focus on efficiency, reduce costs and continue to invest in the right areas of the business.

1TSB established Whistletree to administer the £3.3 billion in mortgages assets purchased in November 2015 from the nationalised NRAM plc (formed from the former Northern Rock) and the loan and mortgage assets acquired from Aidrie Savings Bank in April 2017.
2NPS is based on the question “On a scale of 0-10, where 0 is not at all likely and 10 is extremely likely, how likely is it that you would recommend TSB to a friend or colleague?” NPS is the percentage of TSB customers who score 9-10 after subtracting the percentage who score 0-6. Calculated on a 3 month roll between April – June 2019.
3Bank of England, 20 June 2019, Monetary Policy Summary and minutes of the Monetary Policy Committee meeting.


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