TSB Banking Group saw profits before tax on a management basis increase by over a third in the three months to the end of September, as the lender prepares to launch its mortgage intermediary channel in January 2015.
The bank’s unaudited results for the three months to the end of September saw profits before tax climb 31.6 per cent in this period to £41.6m, with that figure split between £20.7m from the franchise and £20.9m from mortgage enhancement.
The results, published today (24 October) also showed that its mortgage intermediary channel remains on track for delivery in the first quarter of 2015.
“We expect to begin testing our new distribution platform in December ready to receive the first mortgage applications through the intermediary channel in January 2015,” read the results.
Given the current absence of a mortgage intermediary distribution channel, net lending to TSB’s franchise customers reduced by a further £300m to £19.1bn in the third quarter of 2014.
Loans and advances to customers decreased by 2.1 per cent, or £477m compared to June 2014.
While retail secured and unsecured markets remained competitive, this reduction primarily reflected a continuation of recent trends where repayments on the franchise mortgage portfolio, which was originated through both direct and intermediary channels, continued to exceed new loan origination which is currently limited to sales from direct channels.
The report noted that this trend is expected to continue for the remainder of 2014 before the intermediary channel is operational early next year.
The mortgage enhancement portfolio declined by 5.1 per cent, and while slightly faster than anticipated, is not expected to affect the generation of a cumulative £230 million of profit before tax.
Operating expenses were 7.1 per cent lower at £167.9m.
However, excluding the cost of the full year Financial Services Compensation Scheme levy of £17.3m recognised in Q2 2014, underlying operating expenses increased by 2.8 per cent reflecting the ongoing establishment of the group’s support functions and higher investment spend.
The results said: “Costs are expected to be around £700m for the full year which reflects the continued ramp up, with 50 per cent of our intermediary headcount now in role and investment spend that is disproportionately weighted to Q4.”
Paul Pester, TSB’s chief executive, added that strong current account performance grew customer deposits by £500m to £24.2bn. “Meanwhile our plans to enable customers across Britain to buy a TSB mortgage from their local mortgage broker from Q1 2015 remain on track.”
Also over the quarter Lloyds Banking Group’s shareholding came down to 50 per cent and TSB joined the FTSE 250 Index.
Yesterday former Lloyds TSB adviser Ian Taplin renewed his call for the regulator to take action over alleged segmentation of advice at the bank, which he claimed caused disparity in the service the bank’s customers received.
peter.walker@ft.com