TSB to close 17 branches
- Credit: Archant
TSB said it planned to close 17 branches as it revealed a sharp fall in first quarter profits ahead of its £1.7 billion takeover by Spain’s Banco de Sabadell.
The bank is closing sites where it has two or more branches within 500 metres of each other, absorbing the lesser-used locations into the more popular ones.
It plans to keep a lid on costs next year as low interest rates and tough competition weigh on its profit margins.
Statutory pre-tax profits at £34.3 million for the first quarter were down 67% on a year ago. Stripping out one-off effects including a large accounting gain from pension scheme changes last year, they were 27% lower at £34.2 million.
TSB said the fall largely reflected higher costs, with operating expenses up as the group developed its infrastructure after being spun out of Lloyds Banking Group, and investment spending increased.
The bank, which sees itself as a challenger to the likes of Lloyds, Barclays, HSBC and Royal Bank of Scotland, said its results were in line with expectations.
It attracted a 7.9% share of all new and switching bank accounts in the period, ahead of its target of 6% for the fifth successive quarter.
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TSB has increased the number of current account customers by more than 300,000 since January 2014. But its market share is little improved, at 4.3%. Chief executive Paul Pester has previously complained of the “glacial” overall rate of switching.
The first quarter also saw TSB slow a decline in mortgage balances as it re-launched the sale of home loans through mortgage brokers.
Mr Pester said: “TSB is starting to fire on all cylinders as we take on the big banks in our mission to bring more competition to UK banking.
“Whilst we still have a long way to go in bringing better banking to UK consumers, we’re making real progress.
“This is reinforced by Banco de Sabadell’s recommended offer to acquire TSB, which is a real vote of confidence in everything we’ve achieved so far and in our potential to succeed further in the future.”
TSB said it faced challenges from “the sustained low interest rate and competitive environment” with profit margins rising at the start of the year before heading lower in the second half. Lower fees are also likely to hit income.
It added that “cost management will allow the effects of these headwinds to be mitigated” while it will target continued bank account switching and aim to increase the lending on its books.
TSB announced last month that it had agreed to the takeover by Sabadell. The deal, which is conditional on clearance by the Bank of England’s Prudential Regulation Authority (PRA), is thought likely to complete during the summer.
The bank, which operates more than 600 branches serving 4.5 million customers, returned to the stock market in June after the brand was revived when state-backed Lloyds was forced to sell off the sites under EU rules on state aid.