1st February 2024

TSB announces 2023 results

TSB reports a statutory profit before tax of £237.2 million for 2023, an increase of £53.7 million (29.3%) from 2022 – increasing its proposed dividend to Sabadell to £120 million.

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

“We are reporting another year of sustained profitability, demonstrating the impact of both our continued focus on customers, delivering products and services that genuinely meet their needs, and the work to make TSB a simpler, more efficient, and resilient bank.

“Throughout the cost-of-living challenges, our Money Confidence purpose has resonated strongly with our customers – and I’d like to thank everyone at TSB for their continued hard work to step up to support them.”

Financial Results for 2023:

TSB reported a statutory profit before tax of £237.2 million for 2023, an increase of £53.7 million (29.3%) compared to £183.5 million for 2022.
The main driver was higher income which rose by £50.5 million (4.6%) to £1,158.4 million primarily reflecting the impact of the higher interest rate environment, partially offset by lower mortgage margins in a highly competitive market. Net interest margin is 2.75%, up 18bps from the previous year (2022: 2.57%).
Given the strong performance, TSB proposes to pay a dividend of £120 million (2022: £50 million) to its parent company, Sabadell, in the first quarter of 2024, subject to shareholder and regulatory approval.
TSB remains focused on managing costs. Operating expenses decreased marginally by 1.9% to £852.9 million (2022: £869.5 million), though 2022 included the impact of the regulatory fine of £48.7 million relating to the 2018 migration programme. Excluding this, the resulting increase of 3.9% reflects not only inflationary impacts but also an additional provision for a programme of strategic cost saving initiatives (c.£29 million) which will reduce costs from 2024 onwards.
TSB’s cost-to-income ratio (statutory basis) is 73.6% (2022: 78.5%) as we continue to drive further efficiency and simplify our processes for customers and colleagues.
Credit impairment charges rose by £13.4 million (24.4%) to £68.3 million this year (2022: £54.9 million), reflecting the uncertain economic outlook, the higher interest rate environment and increasing inflationary pressures on our customers. In addition, the 2022 charge benefitted from Covid-19 provision releases.
Total customer lending decreased by £1.8 billion (4.7%) to £36.2 billion year-on-year (2022: £38.1 billion), mirroring the slowdown in the UK mortgage market, where applications in 2023 were c.27% lower than the previous year.
Customer deposits reduced by £1.6 billion (4.3%) in 2023 to £34.8 billion (2022: £36.3 billion), primarily driven by lower personal current account deposits. Customers moved their balances towards higher interest-earning savings accounts, and increased spending levels were observed, likely in response to cost-of-living pressures. TSB increased savings balances by 1.7% in 2023.
The balance sheet remains resilient with a Common Equity Tier 1 ratio of 16.7% and Liquidity Coverage ratio of 203%.

Financial Results

Balance sheet and capital (£ million)	At 31 Dec 2023	At 31 Dec 2022	Change vs Dec 2022
Loans and advances to customers	36,245.9	38,050.0	(4.7)%
Customer deposits	34,764.3	36,338.2	(4.3)%
Loan to deposit ratio	104%	105%	(1)pp
Common Equity Tier 1 Capital ratio	16.7%	17.1%	(0.4)pp
Financial performance (£ million)	FY 2023	FY 2022	Change vs 2022
Income	1,158.4	1,107.9	4.6%
Operating expenses	(852.9)	(869.5)	(1.9)%
Impairment losses	(68.3)	(54.9)	24.4%
Statutory profit before tax	237.2	183.5	29.3%
Tax	(62.4)	(81.2)	(23.2)%
Statutory profit after tax	174.8	102.3	70.9%
Net interest margin1	2.75%	2.57%	18bps
Asset quality ratio2	0.18%	0.14%	4bps

1 Net interest income divided by average loans and advances to customers, gross of impairment allowance.
2 Impairment losses on loans and advances to customers divided by average loans and advances to customer, gross of impairment allowance

Business Performance Highlights

Customer Focus

Over 1.27 million products were taken up by customers across TSB’s core product lines (Personal Current Accounts, Savings, Savings Pots, Cards, Loans, Mortgages, Overdrafts, General Insurance) – up 20% compared to 2022.
Over 260,000 new personal current accounts were opened, and customers opened more than 289,000 new savings accounts. TSB provided over £2.5 million in cashback payments to current account customers.
TSB’s award-winning1 Mortgage Intermediary and Operations team helped more than 7,800 first-time buyers get onto the property ladder.
TSB launched a new marketing campaign, featuring Tiny the elephant who symbolises cutting money worries down to size, driving further recognition of TSB’s brand. It was awarded Marketing Week’s ‘Campaign of the Year’.
TSB celebrated its 10-year anniversary (since it returned to the high street as a standalone bank) by selecting 10 lucky customers, who held eligible TSB products, to win £10,000 each.
TSB’s partnership with Lightning Reach (launched in April), is helping customers in financial difficulty to find eligible grants and benefits. Over 3,700 customers have registered and over £40,000 in grants has been awarded to customers so far.
TSB has proactively contacted over 190,000 customers that it considered at heightened risk of falling into financial difficulty to offer assistance and support. The Bank moved quickly to put in place the Government’s Mortgage Charter and led the way in extending similar support to Buy-to-Let customers.
TSB launched its new Rewards Portal offering discounts and savings for customers to reward them for their loyalty and provide support when finances are stretched.

Service Excellence

This year, TSB expanded video banking support and opening hours over the weekend – and has held over 21,000 mortgage video appointments with all TSB mortgage advisers trained to use video. The bank also held over 23,000 general banking appointments over video, with almost a third out of hours.
Customers are making the most of TSB’s new app features with over 400,000 customers visiting the card controls hub every month, over 13,000 customers visiting the mortgage hub every month and 93,000 cheques paid in through the app since mobile cheque-deposit functionality was introduced in April.

Simplification and Efficiency

Over 84% of all TSB products are now opened digitally by customers.
TSB has made it even easier for customers to use TSB Smart Agent (online chat) and total chats were up by 20% in 2023 with a monthly average of 136,000 in the final quarter.
TSB retains the 7th largest network with 211 high-street branches, complemented by over 40 pop-up branches, and three Pods serving communities across Great Britain. TSB is an active member of Cash Access UK, providing solutions such as Banking Hubs and Enhanced Post Offices, in key areas across the UK.

Do What Matters

TSB’s Fraud Refund Guarantee continues to lead the industry in protecting customers – refunding 97% of all fraud cases, compared to the industry average of 64%. TSB’s leading position has also helped bring about a step-change for consumers, as the Government and Payment Systems Regulator (PSR) rules come into force this year mandating all banks to reimburse fraud victims.
TSB is making strong progress on Black, Asian and minority ethnic representation: 16% across all colleagues (against a goal of 14%) and 12% in senior roles (against a goal of 10%). 36 colleagues graduated from Ignite, a development programme for Black and Black mixed heritage colleagues, with a quarter of these being promoted or moving roles during the programme.
In addition to all branches being part of Hestia’s Safe Spaces initiative, TSB launched Online Safe Spaces to support victim-survivors of domestic abuse and around 200 customers accessed TSB’s Emergency Flee Fund. The Flee Fund was also extended to support colleagues.
TSB continues to be the only high-street bank accredited with the Good Business Charter, and TSB’s commitment to the prompt payment of suppliers was recognised with the Good Business Pays ‘Fast Payer Award’ for the third year in a row.
TSB is a signatory to the UN’s Net Zero Banking Alliance, committed to aligning its lending and investment portfolios with net-zero emissions by 2050 or sooner.

Outlook

The UK economy performed better than expected in 2023. It narrowly avoided a recession and house prices were broadly flat. Inflation fell sharply, which halted the decline in real wages, but it remains significantly higher than the Bank of England’s 2% target.

The policy rate is widely thought to have peaked at 5.25%. Forward rates imply there will be rate cuts this year, though the cost of borrowing will rise for many households in 2024, as they refinance expiring fixed-rate mortgages. The mortgage market was very weak in 2023, but we’re seeing positive signs of recovery in the new year as mortgage application volumes are increasing.

The outlook is uncertain though our forecasts assume the risks are skewed to the downside. TSB’s scenarios explore many risks, including the possibility that unemployment – which remains low by historic standards – rises more steeply than expected.

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

- ENDS -

Media Contacts

Supreet Thomas, Head of Communications | 07519 502 123 | supreet.thomas@tsb.co.uk

Joseph Eyre, Senior Media Relations Manager | 07483 432 546 | joseph.eyre@tsb.co.uk

Investors and analysts: | investorrelations@bancsabadell.com

Notes to editors

TSB Banking Group plc's Annual Report and Accounts for 2023 are available on the website.