TSB Bank plc announces 2023 half year results

27th July 2023

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. Calculated on an annualised basis.

TSB reports a statutory profit before tax of £147.9 million for the first half of 2023 (until 30 June), an increase of £45.0 million (43.7%) compared to £102.9 million in the first half of 2022.

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

"These results reflect the strong progress we’ve made to deliver both a better service and more value to TSB customers. We’ve made it easier than ever before for our customers to talk to our highly skilled experts in branches, over the phone and through video banking, as well as improving services through our digital channels."

"At a time when many of our customers are having to manage rising costs, our Money Confidence purpose couldn’t be more relevant. I’m proud that TSB continues to be there to support our customers, and I want to thank colleagues for going above and beyond to look after them."

Financial Results for first half of 2023:

TSB reported a statutory profit before tax of £147.9 million for the first half of 2023, an increase of £45.0 million (43.7%) compared to £102.9 million in the first half of 2022.
The main driver was higher income which increased by £58.0 million (11.0%) to £584.5 million (H1 2022: £526.5 million) primarily reflecting the impact of the higher rate environment, partially offset by lower mortgage margins in a highly competitive market. Year on year we have seen an increase in net interest margin to 2.84% for the 6 months to June 2023 (June 2022: 2.47%). Quarter 2 margin was 2.81% versus 2.86% in quarter 1.
Despite the inflationary pressure, we have only seen a small increase in operating expenses, of £3.2 million (0.8%) to £408.9 million (H1 2022: £405.7 million). Increases in people costs and marketing spend have been largely offset by reductions in property and fraud costs.
Credit impairment charges increased by £9.8 million (54.7%) to £27.7 million (H1 2022: £17.9 million), as the prior period benefited from Covid-19 provision releases. The higher 2023 charge also reflects the uncertain economic outlook, increased interest rate environment and growing inflationary pressures for customers. Customer defaults are increasing but remain within expectation and below historic levels.
Loans and advances to customers of £36.7 billion decreased by £1.2 billion (3.1%) year on year (June 2022: £37.9 billion) and by £1.3 billion (3.4%) compared to the year end (December 2022: £38.1 billion), reflecting lower customer demand in the rising interest rate environment, alongside management action to manage volume in a highly volatile and competitive mortgage market.
Year on year customer deposits have increased £162 million to £35.4 billion (June 2022: £35.3 billion) driven by customers taking advantage of TSB’s competitively priced savings products. The contraction in deposits since the year end of £0.9 billion (2.5%) (December 2022: £36.3 billion) has been driven by current account customers moving funds to interest earning accounts as well as cost-of-living pressures.
The balance sheet remains resilient with a Common Equity Tier 1 ratio of 17.3% (December 2022: 17.1%) and Liquidity Coverage ratio of 177.4% (December 2022: 195.8%).
TSB paid its first dividend to its parent company, Sabadell, in the first half of 2023 following a strong performance in 2022.

Financial Results

Balance sheet and capital (£ million)	At 30 June 2023	At 31 Dec 2022	At 30 June 2022	Change vs. Dec 2022	Change vs. Jun 2022
Loans and advances to customers	36,740.6	38,050.0	37,922.6	(3.4)%	(3.1)%
Customer deposits	35,442.7	36,338.2	35,280.7	(2.5)%	0.5%
Loan to deposit ratio	104%	105%	107%	(1)pp	(3)pps
Common Equity Tier 1 Capital ratio¹	17.3%	17.1%	16.0%	0.2pps	1.3pps

Financial performance (£ million)	H1 2023	H2 2022	H1 2022	Change vs. H2 2022	Change vs. H1 2022
Total income	584.5	581.4	526.5	0.5%	11.0%
Operating expenses	(408.9)	(463.8)	(405.7)	(11.8)%	0.8%
Impairment losses	(27.7)	(37.0)	(17.9)	(25.1)%	54.7%
Statutory profit/ (loss) before tax	147.9	80.6	102.9	83.5%	43.7%
Net interest margin¹	2.84%	2.57%	2.47%	27bps	37bps
Asset quality ratio²	0.15%	0.14%	0.09%	1bp	6bps

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. Calculated on an annualised basis.

Business performance highlights

Customer Focus

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 59%. In the first half of 2023, TSB refunded three in four (73%) fraud victims within five days or less.
Customers are continuing to take advantage of TSB’s increased savings rates and current account features, with over 265,000 new Savings Pots opened this year and £1 million in cashback payments to customers.
TSB was awarded ‘Best Everyday Savings Account Provider’ and ‘Best Junior Cash ISA Provider’ by Your Money.
TSB supported more than 3,000 first-time buyers to get onto the property ladder, 4,000 homeowners have moved their mortgage to TSB, and over 14,000 product-transfers have been provided for customers. TSB continues to deliver a leading mortgage service, recognised by What Mortgage Awards for ‘Best Direct Lender’ for the third year running and ‘Best Fixed-Rate Lender’ for the fourth year running.
TSB’s partnership with Lightning Reach (launched in April) is helping customers in financial hardship to identify eligible grants and funds in addition to benefits. So far, over 1,400 customers have registered for the service.

Service Excellence

TSB has expanded its video banking capability to provide additional opening hours over the weekend, with over 500 general banking appointments taking place on video each week.
New features have been added to the TSB Mobile Banking app, including mobile cheque deposit, contactless controls, gambling blocks and a new Mortgage Servicing Hub. Since introduction, gambling blocks have been used by around 8,000 customers.
TSB has improved more than 70 processes to make its service simpler and easier for customers. This includes extending video banking and providing improved support for people dealing with a bereavement.
TSB Smart Agent (online chat) saw an 18% increase in customer conversations and the service has been enhanced to include new card ordering, overdraft support and video banking appointment booking. TSB continues to help its most vulnerable customers through a 24/7 service with more than 1,500 customers supported.
Over a third of all fraud reports are now made using TSB’s new online tools, giving customers the convenience of being able to report fraud quickly and 24/7.

Simplification and Efficiency

TSB continued to invest in its physical banking services, closing nine of its quieter branches and opening three new shopping-centre Pods in Wood Green, Wigan and Luton, all of which offer cash withdrawals and deposits.
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 one of the funding member banks of Cash Access UK, providing solutions such as Banking Hubs and Enhanced Post Offices, in key areas across the UK.
Product openings have grown 25% compared to the first half of 2022, and over 80% of all products are now opened digitally: either by customers at home using their own device or supported by TSB colleagues in branch.

Doing what matters for people and the planet

TSB delivered 38 ‘Money Confidence workshops’, reaching over 1,000 individuals in the communities we serve, and more than 25 colleagues have already volunteered with a Business in the Community job coaching programme to help improve the skills, confidence, and employment opportunities for jobseekers.
TSB continues to lead on supporting victims of domestic abuse. In addition to all branches being part of Hestia’s Safe Spaces initiative, more than 70 customers have accessed TSB’s ‘Emergency Flee Fund’ since its launch in December.
For the second year running, TSB was awarded the BSI Trust Mark recognising the quality of the support provided to vulnerable customers, and TSB continues to be the only high-street bank accredited with the Good Business Charter.

Outlook

The UK economy remained resilient in the first half of 2023 and inflation continues to fall from its peak, albeit remaining at a high level. Growth remains subdued, and the economic environment remains challenging for many consumers and businesses due to rising costs and a sustained rise in interest rates. Although inflation is set to continue to fall in the near term, market expectations currently point to the Bank Rate reaching 5¾%.

Slow economic growth and higher interest rates bring a risk that unemployment, currently near a 50-year low, may rise and that house prices, which have remained broadly stable in the second quarter of 2023, may experience downward pressure.

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.

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