TSB profits hit as challenger is still paying Lloyds for IT services

PROFITS AT TSB were dragged down last year by spiralling IT costs as the lender prepares to migrate the last remaining customers to its new computer system later this year.

The challenger bank is still working to separate itself from Lloyds Banking Group’s IT system, despite having been spun off from the group in 2013, and is facing rising costs as a result.

Statutory pre-tax profits fell £19.3m, or 10.6 per cent, to £162.7m in 2017, primarily driven by a £122m increase in outsourcing fees paid to Lloyds for using its IT technology. TSB plans to fully migrate to its own platform, built by Banco de Sabadell – which took over the company in 2015 – later this year. Until then, TSB also warned that payments to Lloyds will continue and will lead to a reduction in profit before tax in 2018.

“Until the final phase of the roll-out of our new banking platform to customers is completed the contractual increase in outsourcing fees paid to Lloyds Banking Group will continue into 2018,” the lender said.

In September, TSB decided to delay the full roll-out of its new IT system, originally scheduled for November, into 2018.

This is estimated to result in £70m in extra costs.

In brighter news, TSB plans to pay £30m to its circa 7,000 employees, a £2m rise on the award last year.

TSB added that lending increased 4.9 per cent to £30.9bn and customer deposits were up 3.9 per cent to £30.5bn in 2017.

TSB boss Paul Pester, pictured, said: “Once again in 2017 we saw a real vote of confidence in TSB, as the bank continued to grow and our high-tech transformation really gathered pace.”