TSB has revealed its highest pre-tax profits since relaunching in 2013, as increased lending and higher interest rates bumped up its total income to more than £1bn.
The Edinburgh-headquartered bank said its statutory pre-tax profits hit £183.5m over 2022, higher than the £157.5m it saw the previous year.
Total statutory income surged by more than 12% to £1.1bn, which TSB 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.
The 2022 charge reflects the uncertain economic outlook and growing inflation pressures for its customers, the bank said.
However, TSB insisted, like many other big banks have, it has not seen any significant increase in customers experiencing financial difficulties or missing payments.
Chief executive Robin Bulloch said that its customers are 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 said.
“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.
“We continue to expect more customers to need our support with their finances in the year ahead, but despite the huge pressure people are under, we’ve seen only a small increase in customers in arrears.”
The bank also said it plans to pay a dividend of £50m to its owner Spanish bank Sabadell for the first time, thanks to its “strong” full-year performance.
Looking ahead, TSB stated that while inflation is expected to decline this year, higher interest rates will be a challenge for borrowers.
If the economy slows further, it risks higher unemployment, the bank said. The unemployment rate is typically a leading indicator for banks of the health of household finances and therefore its customers.
TSB, which relaunched in 2013 after merging with Lloyds Banking Group in the 1990s, was fined £48.7m last month by City regulators over computer system failures in 2018 that left millions of its customers unable to access banking services.
On Thursday, the bank said it has ramped up its cost-of-living targeted support, helping 2,300 mortgage customers get back on track after struggling with payments and engaging with more than 40,000 customers most impacted by the cost crunch.
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