TSB Bank has recommended a £120m award to its Spanish parent company as it reported a jump in annual profits on the back of high interest rates, despite a rise in impairments amid “economic uncertainty”.
The high street lender previously paid a £50m dividend to Banco Sabadell last February following record profits.
Numbers came in even stronger last year, with a pretax profit of £237m for the full year, jumping 29 per cent from £184m in 2022.
However, the bank set aside £68m to cover bad loans, up nearly a quarter (24 per cent) from the previous year, which itself saw a 54 per cent rise from 2021.
TSB said the higher impairment charges were mainly tied to “the full release of Covid-19 related provisions throughout the year”.
Meanwhile, consumer lending dropped 4.7 per cent to £36.2bn, while deposits fell 4.3 per cent to £34.8bn as the bank dealt with fierce competition in the deposit and mortgage markets, alongside customers squeezed by the cost-of-living crisis.
TSB notched a four per cent rise in net interest income (NII) to £1bn – reflecting the difference between what the firm pays out and receives in interest – on the back of the Bank of England hiking borrowing costs to a 15-year high.
The lender noted how this figure was partially offset by “lower mortgage margins in a highly competitive market”. Its worst-case scenario estimated house prices could fall as much as 18 per cent this year.
Chief executive Robin Bulloch said: “In the face of continued economic uncertainty and the prospect of a prolonged period of low economic growth, TSB will remain committed to executing its strategy, simplifying the business to reduce costs, and supporting customers, providing them with solutions that genuinely meet their needs and deliver good outcomes.”
Analysts expect the UK’s big banks to see their NII shrink markedly in 2024 when the central bank starts lowering interest rates.