TSB staff to share £28m payout but bank warns over hit to profits in 2017
TSB plans to pay £28 million to staff after pre-tax profits soared last year, but the high street lender warned it would take a "significant" hit in 2017.
The bank said statutory pre-tax profit rose 169% to £182 million in 2016 from £67.6 million a year earlier, amid an 11.4% jump in lending to £29.4 billion, and a 13.6% rise in customer deposits, which also reached £29.4 billion.
Stripped of one-off items and currency effects, pre-tax profit rose 68.1% to £177.7 million.
But TSB does not expect to keep up the pace, saying soaring costs and ultra-low interest rates will take their toll.
The company said: "Whilst we expect to continue to grow TSB in a responsible and sustainable way during 2017, the prevailing low interest rates, the contractual increase of more than £100 million in outsourcing fees we pay to Lloyds Banking Group, and the continued roll-off of the Mortgage Enhancement portfolio will, we expect, lead to a significant reduction in our profit before tax in 2017."
The lender is still working to separate itself from Lloyds Banking Group's IT system, despite having been spun off from the group in 2013, and is facing rising costs as a result.
TSB plans to migrate to its own platform built by Banco de Sabadell - which took over the company in 2015 - later this year.
It is also keeping an eye on Britain's economy but is "mindful of the challenges ahead", including uncertainty surrounding Brexit.
The bank is preparing to shell out £28 million to its 7,700 employees - a £2.5 million rise on the award last year.
Most will receive a payout equivalent to more than six weeks' pay or 12.5% of their basic salary.
Chief executive Paul Pester said: "When we launched TSB back in 2013, we set out to do our bit to break the stranglehold of the big five banks and bring a different sort of banking to the UK.
"Three years on, we've shown that a bank focused on serving local communities can really thrive.
"We've grown at twice the pace we aspired to back in 2014. More people chose TSB than ever before in 2016 and we are now Britain's most recommended high street bank."