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TSB Winning Battle Of The Banks

TSB is winning almost one in every ten current accounts being opened or moved in Britain. That is well ahead of the challenger bank’s target to capture 6 per cent of accounts over the next five years.

‘We are delighted. We have a mountain to climb to mount a real challenge to the Big Four banks but we are definitely at base camp,’ said Paul Pester, the chief executive.

He says he expects the rate of new account openings to slow down and admits that TSB would struggle to lend out the money as fast as it is coming in if customers continued to move their accounts at their present rate.

‘With the current accounts come a lot of customer balances,’ he declared. ‘That is fantastic, but our challenge is to use those balances to lend.

‘If we grow too fast we won’t be able to deploy those balances quickly enough, so we might take our foot off the gas to catch up with mortgage lending.’

TSB has heavily pushed a Classic Plus current account, which offers 5 per cent annual interest on balances up to £2,000.

Customer deposits overall grew by 1.9 per cent or £500million to £24.2billion, while loans reduced by 2.1 per cent to £22billion. The bank intends to enter the mortgage broker market, which accounts for 60 per cent of homeloan business, in January, and has a target of winning 2 per cent or around £4billion of lending.

‘We are building up a lot of dry powder for when we go into the broker market,’ Pester said.

Pretax profits at the bank rose 29 per cent to £33.1million in the third quarter of this year.

TSB, whose shares were up 3.1p to 262.1p, was spun out of Lloyds Banking Group – which was forced by the European Commission to divest branches as a condition of a state rescue – and floated on the stock market in June.

Lloyds, which still holds a 50 per cent stake, had previously intended to sell the 630 branches that form TSB to the Co-op Bank.

That deal collapsed, however, after a £1.5billion black hole was discovered in Co-op Bank’s capital. A report by the Treasury Select Committee this week warned that the TSB is a smaller bank than the Co-op would have been and said there is a risk ‘a bank of this size might struggle to grow significantly’ and act as a true challenger.

‘The committee made the very obvious point that we would have had a bigger market share of current accounts,’ Pester said. ‘But these figures show we can compete. We have the sharpest teeth of the challenger banks.’

He added that the decision by fellow challengers Aldermore and Virgin Money to put their float plans on ice ‘did not affect their ability to compete’.


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