TSB profits drop 44% in H1

The bank said its "performance in the first half of the year is consistent with previously guided expectations", with decreased profits largely due to lower average loan balances and the annual FSCS levy charge of £14.8 million. Statutory profit before tax was further reduced by Sabadell transaction related costs.

However TSB announced strong net Franchise lending in the first half of 2015. Driven by the launch of the new intermediary channel in January 2015, Franchise lending balances grew by £266.3 million in H1. The TSB mortgage broker service, launched in January, has received £1.9 billion of gross mortgage applications to the end of the first half of 2015, with gross lending through this channel totalling £665 million.

The success of the new intermediary channel enabled TSB to deliver positive quarterly lending growth for the first time since its launch on the high street in September 2013. TSB's profits for the three months to 31 March 2015 increased by 153.3% to £34.2 million compared to Q4 2014.

Last month, the PRA and FCA approved the bid by the Sabadell Group, announced on 17 April 2015, to acquire all of the shares of TSB Banking Group plc.

The deal, worth £1.7 billion, saw Lloyds sell its 50% stake in the bank.

In a statement, TSB said:

"We continue to expect that the effects of sustained low interest rates, high levels of competition and mortgage growth will offset the margin expansion experienced in the first half and result in the Franchise margin being broadly flat in 2015 compared to 2014. The 2015 exit rate for margin is expected to be notably lower than the average for the year.

"We 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 partially mitigate the effects of these headwinds. We continue to target expenditure of no more than £720 million in 2015 whilst continuing to deliver our growth strategy including increasing Franchise lending from 2014 levels by over £1.5 billion in 2015, and consistently taking more than a 6% share of all new and switching bank accounts each quarter."