Independent TSB bank off to a solid start

TSB boss Paul Pester has hailed 2014 as 'pivotal' for the bank, with pre-tax profits up 2.3 per cent to �133.7m. Picture: Getty
TSB boss Paul Pester has hailed 2014 as 'pivotal' for the bank, with pre-tax profits up 2.3 per cent to �133.7m. Picture: Getty
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THE boss of TSB, the high street “challenger” bank demerged from Lloyds Banking Group last summer, has hailed 2014 as “a pivotal year” – as he refused to rule out acquisitions to maintain trading momentum.

Chief executive Paul Pester said 500,000 people – or about one in 12 of those switching or opening a new bank account last year – had chosen TSB.

That helped lift maiden annual pre-tax profits 2.3 per cent to £133.7 million, up from £130.7m in the previous year. The bank also launched a mortgage broker service in 2014, which it said had got “off to a flying start”, with more than £300m worth of applications to date.

Pester said: “Growth remains our key focus and we expect TSB to continue to consistently attract more than 6 per cent of all new and switching bank accounts each quarter.”

He declined to comment on reports that TSB had made a tentative takeover approach for rival challenger bank Aldermore, possibly forestalling the latter’s imminent flotation plan.

But Pester added: “We are all about growth. If we can find the right thing at the right price we would be interested.”

He said the results showed that TSB had made a strong start to its life as an independent lender, 19 years after Lloyds took it over in 1995.

Lloyds was ordered by the European Commission to sell 632 branches because of its £20 billion state bailout in 2009. It originally agreed to sell them to the Co-op Bank for £750m, but that deal was derailed when the mutual firm was found to have a £1.5bn hole in its balance sheet.

Lloyds decided on a flotation of the assets under the TSB brand instead. It has sold 50 per cent of the shares so far and must sell the remaining 50 per cent by the end of this year.

Pester said 2014 was a “pivotal year” as the bank established itself as a challenger to the established players.

He added: “In terms of financial performance, we’ve delivered or exceeded all that we outlined at last year’s initial public offering (IPO).”

TSB’s total income jumped 58 per cent to £927.4m from £587.2m. The group’s net interest margin – the difference between the interest charged on loans and paid on customer deposits – edged down to 3.56 per cent from 3.59 per cent.

Banking analysts said that this was to be expected at this early stage in the growth of a challenger bank trying to offer competitive prices in order to take market share. The cost/income ratio rose 11 percentage points to 75.1 per cent.

Deposits increased more than 6 per cent to £24.6bn. One analyst commented: “Not a bad start for TSB as a spun-off concern, if not a shoot-the-lights-out one.” The lender’s shares closed down 1.6p at 259.6p, compared with last June’s float price of 260p.

• Lloyds publishes its annual profits tomorrow, with the group expected to restore a “token” dividend nearly seven years after its taxpayer rescue.

The City’s consensus expectation is that underlying pre-tax profits for 2014 will have risen to £7.8bn, up from £6.2bn the previous year.

The results come amid unconfirmed reports that Lloyds may announce it has tweaked the terms of chief executive Antonio Horta-Osorio’s bonus to make it dependent on the sale of the government’s remaining 24 per cent stake in the bank.

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