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01 Feb 2021 | 15:25

TSB falls into the red in 2020 amid drop in rates, impairment losses

(Sharecast News) - TSB flipped into the red during the previous year as the Bank of England lowered interest rates and due to the measures enacted by the government to combat the pandemic. The UK lender, which is owned by Spain's Banco Sabadell, posted a statutory loss before tax of £204.6m, versus a £46m profit in the year before.

Despite that, TSB boss, Debbie Crosbie, said the underlying performance was "much improved".

"We're ahead of plan in delivery of our strategy and have relaunched our brand, all of which sets us up well for the future," she added.

"However, the impact of the pandemic and the additional cost of restructuring overshadows our financial result for the year."

Total income fell from £984.9m to £894m on a mix of lower interest rates, reduced income from overdrafts and pricing changes driven by regulatory changes and a drop in consumer spending.

The lender's net interest margin dropped from 2.75% to 2.47%.

TSB also booked £164m of impairment losses alongside a £90.6m of restructuring charges, up from £60.5m and £43.7m in the year before.

Included in its one-off costs was £55m provision for estimated charges relating to the treatment of some customers who were in arrears, the lender said.

Underlying operating expenses meanwhile reduced 2.3% to £827.7m.

The lender's Common Equity Tier One capital buffers shrank from 20.6% to 14.8%, due to the impact of regulatory changes in TSB's secured credit risk models, the statutory loss in 2020 and faster growth in secured retail balances.

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