TSB profits fall as IT delays take toll on lender
TSB plans to fully migrate to its own platform built by Banco de Sabadell – which took over the company in 2015 – later this year.
Profits at TSB were dragged down last year by spiralling IT costs as the lender prepares to migrate the last remaining customers to its new computer system later this year.
The challenger bank 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.
Statutory pre-tax profits fell £19.3 million, or 10.6%, to £162.7 million in 2017, primarily driven by a £122 million increase in outsourcing fees paid to Lloyds for using its IT technology.
TSB plans to fully migrate to its own platform, built by Banco de Sabadell – which took over the company in 2015 – later this year.
Until then, TSB also warned that payments to Lloyds will continue and will lead to a reduction in profit before tax in 2018.
“Until the final phase of the roll-out of our new banking platform to customers is completed the contractual increase in outsourcing fees paid to Lloyds Banking Group will continue into 2018,” the lender said.
In September, TSB decided to delay the full roll-out of its new IT system, originally scheduled for November, into 2018.
This is estimated to result in £70 million in extra costs.
In brighter news, TSB plans to pay £30 million to its circa 7,000 employees, a £2 million rise on the award last year.
TSB added that lending increased 4.9% to £30.9 billion and customer deposits were up 3.9% to £30.5 billion in 2017.
TSB boss Paul Pester said: “When we launched TSB in 2013, we set out to bring more competition to UK banking and break the stranglehold of the big five banks.
“Once again in 2017 we saw a real vote of confidence in TSB, as the bank continued to grow and our high-tech transformation really gathered pace.”
“We’ve already put our money where our mouth is – investing millions of pounds of our own money to build new services – and our parent, Sabadell, has announced up to £100 million of funding, with an initial tranche of £30 million, to invest in small businesses right across the UK.”