Delivering strong growth. Delivering on our promise to customers.

21st July 2016

More people choose TSB as a home for their banking, savings, and mortgage needs.
TSB now Britain's most recommended high street bank.

Today, TSB announces its financial results for the six months to 30 June 2016. Launched onto high streets across Britain nearly three years ago, TSB has continued its mission to bring more competition to UK banking and is now Britain's most recommended high street bank ⁽¹⁾.

Highlights for the half include:

Total customer lending at £27.9 billion, up £6.3 billion (29.0%) on the first half of 2015, of which £2.7 billion relates to the acquisition of former Northern Rock customers in December 2015.
Franchise customer lending at £23.1 billion, up £4.0 billion (21.2%) on the first half of 2015 as more people chose TSB as a home for their mortgage.
Customer deposits at £28.1 billion, up £3.2 billion (13.0%) on the first half of 2015 as more customers continue to trust TSB with their savings.
7.0% of all customers opening a new bank account or switching banks chose TSB in the first half of 2016, ⁽²⁾exceeding its 6% target.
Bank Net Promoter Score (NPS) up 10 points to 24 points ⁽³⁾(year-to-date) as more customers than ever before would recommend TSB to friends and family.
Profits more than double year-on-year to £107.7 million (management basis ⁽⁴⁾) - a rise of 144.8% on H1 2015.
TSB's capital position remains one of the strongest of the UK banks with a common equity tier one ratio of 17.2%.

Paul Pester, TSB Chief Executive Officer, said:

"The first half of the year was another period of strong growth for TSB. I'm delighted that, on average, we welcomed more than 1,250 customers to TSB each day in the first six months. The fact that TSB is now rated as Britain's most recommended high street bank is a huge testament to the dedication and care delivered by our Partners every day.

"When we launched the bank nearly three years ago, we did so with the promise that we would bring more competition to UK banking and ultimately make banking better for all UK consumers. These results demonstrate the progress we are making as we deliver on that promise - building a robust bank with a focus on its customers, underpinned by responsible lending and outstanding customer service.

"Looking forward, our mission remains unchanged. In an uncertain world, TSB's solid foundations - plus the additional firepower provided by Sabadell - will support our responsible growth strategy as we continue to make banking better for all UK consumers."

Financial Results

Balance sheet and capital	At 30 Jun 2016	At 31 Dec 2015	At 30 Jun 2015	Change Vs. Dec 15	Change Vs. Jun 15
TSB Franchise customer lending (£ million)	23,147.0	21,119.4	19,101.0	9.6%	21.2%
Total lending (£ million)	27,929.0	26,398.1	21,655.2	5.8%	29.0%
Total deposits (£ million)	28,135.4	25,874.2	24,905.0	8.7%	13.0%
Loan to deposit ratio	99.3%	102.0%	87.0%	(2.7)pp	12.3pp
Common Equity Tier 1 capital ratio	17.2%	17.8%	19.5%	(0.6)pp	(2.3)pp
Financial performance	H1 2016	H2 2015	H1 2015	Change Vs. H2-15	Change Vs. H1-15
Franchise profit before tax (£ million)	48.5	30.0	10.3	61.7%	370.9%
Mortgage Enhancement profit before tax (£ million)	24.4	29.5	33.7	(17.3)%	(27.6)%
Acquired ex-Northern Rock Loans (£ million)	34.8	2.2	-	-	-
Management profit before tax (£ million)	107.7	61.7	44.0	74.6%	144.8%
Statutory profit before tax (£ million)	125.4	44.4	23.2	182.4%	440.5%
Franchise banking net interest margin ⁽⁵⁾	3.31%	3.53%	3.69%	(22)bp	(38)bp
TSB asset quality ratio ⁽⁶⁾	0.30%	0.37%	0.37%	7bp	7bp
Operating costs (management basis) (£ million)	339.0	349.0	362.5	2.9%	6.5%

Strategic update

TSB's three strategic pillars have remained the same since re-launching onto high streets across Britain in September 2013: to provide great banking to more people, to help more people to borrow well, and to provide the kind of banking people tell us they want and we believe they deserve.

1. Provide great banking to more people

Grow market share of bank accounts by consistently taking a greater than 6% share of gross flow over a five year period.

In H1, customers continued to move to TSB, helping us achieve a 7.0% share of flow of all new and switching bank accounts - exceeding our 6% target.
Customer deposits grew to £28.1 billion (up 13.0% compared with H1 2015).
In addition to the continued strong performance of the Classic Plus account, more people are choosing TSB as a destination for their savings, with TSB's Fixed Rate ISA proving particularly popular as savings grew by 12% compared with H1 2015.

2. Help more people borrow well

Grow Franchise customer lending by 40% to 50% over a five year period from IPO.

Balance sheet growth continues to be strong, with loans and advances to customers growing by 29.0% year-on-year to £27.9 billion.
This growth includes the addition of former Northern Rock customers in December 2015. These customers legally transferred to Whistletree - a trading name of TSB Bank plc - on 18 July 2016.
A 21.2% increase in TSB lending (Franchise loan balances) to £23.1 billion reflects the continued strong performance of TSB's mortgage broker service, which attracted over £3 billion of mortgage applications in H1.

3. Provide the kind of banking experience people want and deserve

Deploy TSB's strong digital capability. Build greater consideration of the TSB brand. Deliver a differentiated customer experience through our Partners.

More customers than ever before are recommending TSB to friends and family. The Bank's Net Promoter Score increased by 10 points to 24 year-on-year.
Independent research company, BDRC, confirms TSB as Britain's Most Recommended High Street Bank for 2016.
TSB reinforced its commitment to local communities by announcing a five year partnership with Trinity Mirror and Pride of Britain and Pride of Sport in May. The awards celebrate ordinary people who do extraordinary things in their local communities.

Outlook

Our performance in the first half of the year shows TSB performing strongly against our strategy, leaving us well positioned to face into the uncertainties and economic headwinds that may lie ahead. TSB's capital position remains one of the strongest of the UK banks with a common equity tier one ratio of 17.2%; and we will continue to be a responsible lender, operating in the real economy and supporting the needs of our customers. We expect to continue to grow, but will only do so in a responsible and sustainable manner. The expectation of lower for longer interest rates and the contractual increase in IT platform costs in 2017 will have a bearing on the financial performance in future periods.

The capabilities of Sabadell, and its long-term commitment to TSB, will help us to bring more competition to UK banking. Our significant programme to transform TSB's IT infrastructure is well underway, which in turn will allow TSB to continue to provide the kind of banking customers want and deserve.

Media Contacts

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Notes to editors

Source: Independent benchmark study (covering all major banks) conducted by BDRC Continental; sample of 15,000 UK consumers, March 2016.
Source: CACI Current and Savings Account Market Database (CSDB) which includes current, packaged, youth, student and basic bank accounts, and new account openings excluding account upgrades. Data presented on a two month lag.
NPS is based on the question "On a scale of 0-10, where 0 is not at all likely and 10 is extremely likely, how likely is it that you would recommend TSB to a friend or colleague?" NPS is the percentage of TSB customers who score 9-10 after subtracting the percentage who score 0-6. Calculated on a year to date rolling average January - June 2016 and compared with the same period in 2015.
Management basis is the basis of reporting used by the Board to assess performance without the distortion of one-off and volatile items which are included on a statutory basis.
Management basis Franchise net interest income divided by average Franchise loans and advances to customers, gross of impairment allowance.
Impairment charge on loans and advances to customers divided by average loans and advances to customers, gross of impairment allowance.