Edinburgh-based TSB Bank posts higher profits and says borrowers 'coping well', for now

Edinburgh-headquartered TSB Bank has posted its highest pre-tax profits since relaunching in 2013 as it benefited from increased lending and higher interest rates.

The high street bank said its statutory pre-tax profits hit £183.5 million in 2022, up 16.5 per cent on 2021, with proposals to pay Spanish parent group Sabadell a dividend for the first time. Total statutory income surged by more than 12 per cent to £1.1 billion, which the bank said reflected it lending more, as well as taking in more cash from higher interest rates and deposit margins.

The lender saw an increase in borrowers upping their mortgage repayments or paying them off early in order to fix a new product ahead of their current rates expiring in a “rapidly rising interest rate environment”. However, the bank ramped up its impairment provisions to nearly £55m to cover credit losses, from just £100,000 the previous year, when it had “exceptionally” low charges thanks to releasing Covid-related provisions.

TSB relaunched in 2013 after merging with Lloyds Banking Group in the 1990s and was acquired by Sabadell Group in 2015.

Chief executive Robin Bulloch said that customers were generally “coping well” and showing resilience. More customers used savings pots linked to their current accounts, and there has been a shift from variable to fixed-rate savings accounts as people lock away money for longer.

“There has also been a very small shift from discretionary spending such as treats, meals and nights out, to non-discretionary spending on essentials such as mortgages, food and energy bills,” Bulloch noted. “Inflation is definitely having an impact on outgoings, and we can see that with debt and credit card spending now higher than pre-pandemic levels. But at the same time, with employment levels high and a number of businesses, like TSB, stepping up to support employees, this has been largely offset by salary increases and government support measures.”

The bank also said it plans to pay a dividend of £50m to Sabadell for the first time, thanks to its solid full-year performance. Looking ahead, TSB said that while inflation is expected to decline, higher interest rates will be a challenge for borrowers.