TSB share price: Challenger bank releases quarterly update

on Apr 29, 2015
Updated: Oct 21, 2019
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TSB Banking Group Plc (LON:TSB) has released its first-quarter update.

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**Highlights from the company statement:**
Q1 2015 compared to Q1 2014
Group profit before tax on a management basis decreased by 27.2% compared to Q1 2014 primarily reflecting higher costs, partially offset by continued improvement in impairment losses.

Total income decreased by 1.9% reflecting a decrease in interest income from lower Franchise lending balances and a decrease in other income reflecting lower Added Value fee income. These were partially offset by higher earnings from the Mortgage Enhancement portfolio where the comparative period did not recognise a full quarter of earnings as it was transferred to the Group with effect from 28 February 2014.

Operating expenses were 11.1% higher reflecting the establishment of the Group’s stand alone cost base during 2014, in particular completion of the build of the corporate support functions during 2014 and increased investment spend.

Impairment charge decreased by 31.1% reflecting the favourable UK economic environment. Group AQR decreased to 0.35% from 0.52% in Q1 2014.

Summary and outlook
TSB has continued to build on the strong start made in 2014.

The Sabadell transaction continues to progress and we remain resolutely focused on delivering our growth strategy and bringing more competition to UK banking.

The first quarter of 2015 has been another period of strong progress in continuing to establish TSB’s credentials as Britain’s challenger bank. Our Q1 2015 financial performance was in line with our expectations and we are continuing to make solid progress with our strategic delivery, particularly with regards to the mortgage intermediary channel.

Certain challenges remain however, particularly the sustained low interest rate and competitive environment. Given this environment we continue to expect the Franchise margin to be broadly flat in 2015 compared to 2014, with margin expansion early in the year offset by negative factors in the second half. The 2015 exit rate for margin is expected to be notably lower than the average for the year. We also continue to expect other income to come under modest pressure given the early implementation of reduced interchange fees and lower Added Value fees contributing to a circa £15 million reduction in Franchise other income in 2015 compared to 2014.
During 2015, cost management will allow the effects of these headwinds to be mitigated and we continue to target expenditure of no more than £720 million in 2015 whilst continuing to deliver our growth strategy including increasing the balance of Franchise lending by over £1.5 billion in 2015 and consistently taking more than a 6% share of all new and switching bank accounts each quarter.

**More to follow…**
As of 06:55 BST, Wednesday, 29 April, TSB Banking Group PLC share price is 334.60p.

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