TSB Bank plc announces 2022 half-year results

28th July 2022

1. Fully loaded. 2. Reflects gains and losses on derivatives partially mitigated by the use of hedge accounting, where relevant criteria are met, and volatility associated with share schemes. 3. Net interest income divided by average loans and advances to customers, gross of impairment allowance. 4. Impairment losses on loans and advances to customers divided by average loans and advances to customer, gross of impairment allowance. Calculated on an annualised basis.

Financial results for first half 2022:

TSB reported a statutory profit before tax of £102.9 million, compared to £42.9 million profit in H1 2021.
Total customer lending at £37.9 billion increased by £0.5 billion (+1.4%) in H1 2022 (£2.4 billion: +6.7% year-on-year), with growth driven by mortgages.
Customer deposits at £35.3 billion decreased by £0.7 billion (-1.9%) in H1 2022 (£0.3 billion: -0.7% year-on-year), reflecting an increase in consumer spending after the easing of Covid-19 restrictions.
Total income of £523.3 million (H1 2021: £471.6 million) was driven by higher customer lending balances as well as higher income from increased card spending post-Covid restrictions. Our net interest margin has increased to 2.47% (H1 2021: 2.44%) as margins earned on customer deposits have increased, partially offset by lower margins on new customer mortgages written.
The reduction in operating expenses to £386.0 million (H1 2021: £405.7 million) reflects lower resource, property and marketing costs. TSB’s cost-to-income ratio was 74% (H1 2021: 86%).
Credit impairment charges of £17.9 million represent a decrease of £6.7m compared to H1 2021. The H1 2022 charge reflects an improved outlook, with lower unemployment and house prices holding. However, this is partially offset by the potential impact of higher interest rates and inflationary pressure on consumers.
Additional restructuring costs of £8.2 million relate to branch closures and associated restructuring, as set out in November 2021. There is a £9.0 million increase in the provision for estimated charges relating to the treatment of some customers in arrears.
The balance sheet remains resilient, with a Common Equity Tier 1 ratio of 15.9% and Liquidity Coverage ratio of 155%.

Robin Bulloch, TSB’s Chief Executive Officer, said:

"This represents another strong set of results for TSB. The past six months have been incredibly challenging for many people across the UK, and I am deeply grateful to all TSB colleagues for helping customers continue to have Money Confidence during this time.

"We’ve invested in improving the customer experience, pressing ahead with our programme of branch upgrades and further developing our digital offer, as well as continuing to offer a strong mortgage proposition – all of which has contributed to sustainable balance sheet growth and improved profitability.

"As we move through the second half of the year, our focus continues to be driving growth across our business and making sure that TSB is the bank of choice for more customers for more of their financial needs."

Financial Results

Balance sheet and capital (£ million)	At 30 June 2022	At 31 Dec 2021	At 30 June 2021	Change vs. Dec 2021	Change vs. Jun 2021
Loans and advances to customers	37,922.6	37,383.8	35,530.3	1.4%	6.7%
Customer deposits	35,280.7	35,951.9	35,538.4	(1.9)%	(0.7)%
Loan to deposit ratio	107%	104%	100%	3pps	7pps
Common Equity Tier 1 Capital ratio¹	15.9%	15.8%	14.4%	10bps	150bps

Financial performance (£ million)	H1 2022	H2 2021	H1 2021	Change vs. H2 2021	Change vs. H1 2021
Total income	523.3	508.4	471.6	2.9%	11.0%
Operating expenses	(386.0)	(391.6)	(405.7)	(1.4)%	(4.9)%
Impairment losses	(17.9)	24.5	(24.6)	(173.1)%	(27.2)%
Management profit/ (loss) before tax	119.4	141.3	41.3	(15.5)%	189.1%
Restructuring and other one-off items	(8.2)	(19.2)	(12.0)	(57.3)%	(31.7)%
Collection and recovery conduct charges	(9.0)	-	-	n/a	n/a
Migration related items	4.4	(0.4)	10.1	n/a	(56.4)%
Banking volatility²	(3.7)	(7.1)	3.5	(47.9)%	(205.7)%
Statutory profit/(loss) before tax	102.9	114.6	42.9	(10.2)%	139.9%
Net interest margin³	2.47%	2.44%	2.44%	3bps	3bps
Asset quality ratio⁴	0.09%	(0.13)%	0.14%	22bps	(5)bps

1. Fully loaded.

2. Reflects gains and losses on derivatives partially mitigated by the use of hedge accounting, where relevant criteria are met, and volatility associated with share schemes.

3. Net interest income divided by average loans and advances to customers, gross of impairment allowance.

4. Impairment losses on loans and advances to customers divided by average loans and advances to customer, gross of impairment allowance. Calculated on an annualised basis.

Business performance highlights

A relentless focus on serving customers

We helped over 10,000 first time buyers purchase a home in the first half of the year. We had a record number of applications in May and offered more convenient ways to serve mortgage customers, including the launch of live chat. Video banking accounted for 66% of all mortgage appointments.
We were awarded YourMoney.com ‘Best Reward Current Account Provider’ for Spend & Save Plus and we’ve opened over 100,000 personal current accounts. Customers are enjoying the benefits of the Spend & Save account features, with a 94% increase in the number of Savings Pots opened compared to the first half of 2021. The Save the Pennies feature helped customers round up over £16.5 million into these Savings Pots. Additionally, active customers were rewarded with £500,000 in cashback payments.
Our partnership with BankiFi and the new Revenu app has helped our small business customers to better manage their finances and get paid on time. TSB was also recognised as ‘Best Online Banking Provider’ at the Business Moneyfacts Awards.
At a time when £1.6mn is lost to Authorised Push Payment fraud every day by UK banks, TSB offered industry leading protection for its customers through its Fraud Refund Guarantee, refunding 98% of all fraud cases – more than twice the industry average of 47%.

Delivering leading digital services to our customers

The number of digitally active customers continues to grow, with 80% now using the TSB Mobile Banking App, up 5% from last year. TSB Mobile is now the sole digital channel for three fifths (60%) of our customers.
We continue to strengthen our digital banking offer. New customers can open a current account in less than ten minutes through the Mobile Banking App, and also apply for a credit card or a loan through the app.
We’ve developed a Mobile Banking App specifically for iPads to support over a quarter of a million customers that bank with us on these devices.
Customers can now access fintech partners, such as ApTap, Wealthify and Farewill – all from their TSB Mobile App.
TSB Smart Agent facilitated almost 600,000 customer conversations on web and TSB Mobile App, with a 23% increase in conversations through mobile.

Operational excellence – establishing an operating model that’s fit for the future

A further 35 TSB branches were upgraded in the first half of the year to create more inviting spaces for customers. This includes more self-serve deposit capability and video banking options. We now have a total of 155 upgraded branches – with more of the network earmarked for investment before the end of the year.
We closed 70 branches, as set out in November 2021, and we retain the 7th largest network of 220 branches.
Our branches are complemented by over 40 ‘pop-ups’ serving communities across Great Britain, and we are active participants in the Cash Access Group Banking Hubs programme.

Doing What Matters for society

We’re the first bank to be recognised by the British Standards Institution (BSI) for our work to identify, respond to and support vulnerable customers. We’ve received a Mark of Trust by meeting the BSI requirements for Inclusive Access Provision.
42% of senior roles at TSB are held by women, compared to 36% across the industry. Our female representation, combined with inclusion initiatives, saw us recognised as a Times Top 50 Employer for Women.
We are proud to be signatories to the Black Talent Charter and have appointed 17 interns within our major offices as part of the 10,000 Black Interns programme.
We became one of the first banks to introduce equal parental leave.
We received the Good Business Pays ‘Fast Payer Award’ for our prompt payment of suppliers. 97% of our small business suppliers were paid within seven days in H1.
In July, we announced support for colleagues impacted by the increased cost-of-living – with over three-quarters of TSB colleagues to receive £1,000 each over the next seven months.

Outlook

The first half of 2022 has been challenging for many consumers as they feel the impact of inflation and the cost-of-living crisis. Markets indicate the potential for further increases to interest rates by the end of the year.

Consumer spending will be tempered by higher prices and higher interest rates. As pressures on households increase, we may yet see the economy slow further, bringing the risk of higher unemployment. While demand for housing is showing some signs of easing, initial forecasts suggest a soft landing for the housing market, with a slowdown, rather than a more severe correction.

TSB is well placed to support its customers against this economic backdrop. The business has solid foundations, with a robust capital and liquidity position, and a strong focus on serving its customers and delivering its ever more relevant Money Confidence purpose.

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