TSB Bank profits up 45 per cent on rising rates as impairment charges soar too
TSB Bank’s profits were lifted by rising interest rates, but the bank flagged challenges ahead as impairment charges soared by 54 per cent on last year.
In the first half of the year pretax profit climbed 45 per cent to £147.9m, up from £102.9m in the same period last year. The lender noted this was primarily driven by “the impact of the higher rate environment”.
Net interest margin, which measures the difference between what the bank receives and pays out in interest payments, hit 2.84 per cent compared to 2.47 per cent last year. Many banks have raked in bumper profits after the Bank of England has hiked the base rate 13 times in a row in an attempt to contain inflation.
However, the bank also said that it suffered slightly from lower mortgage margins in a “highly competitive environment”.
The bank set aside £27.7m in impairment charges, 54 per cent higher than last year reflecting the “uncertain economic outlook…and growing inflationary pressure for customers”.
Defaults are increasing, but remain within expectation and below historical levels, TSB said.
Robin Bulloch, chief executive, said: “These results reflect the strong progress we’ve made to deliver both a better service and more value to TSB customers.”
Looking forward, TSB acknowledged that unemployment, which is near a 50-year low, may rise. Historically unemployment and arrears are closely correlated.
It noted it is “well placed to support its customers against this economic backdrop”.
TSB was sold to Banco Sabadell in 2015 by Britain’s largest mortgage lender, Lloyds Bank, for £1.7bn. At the end of 2022, TSB announced it would pay a £50m dividend to Sabadell.
It has been a takeover target for other UK lenders such as the Co-op Bank while Nationwide has also been rumoured to be interested.
Across Sabadell, net profit grew 44 per cent in the second quarter to €564m thanks to a near 30 per cent rise in net interest income.