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TSB takes £176m hit over IT fiasco

Paloma Kubiak
Written By:
Paloma Kubiak
Posted:
Updated:
27/07/2018

TSB swung into the red in H1 2018 following the bank’s IT meltdown in April as it counted the multi-million pound cost in customer compensation and foregone income as a result.

The bank reported a loss before tax of £107.4m, from a profit of £108.3m last year, following the significant impact by the IT migration upheaval in April.

A bungled IT system upgrade resulted in customers being locked out of mobile and online banking services for weeks. And it was also revealed that over 1,000 customers suffered fraud as a result.

While the lender today said its mobile app, online and telephone banking and branch service levels “are much improved” following the switch to the new IT system, it has taken a big hit in terms of financial performance and customer account numbers.

It earmarked £176.4m in ‘post-migration costs and foregone income’, including:

  • £115.8m for customer redress, associated remediation resource costs and fraud costs
  • £30.7m in additional resource and advisory costs to support the remediaton of systems
  • £29.9m in foregone income related to waived fees and charges as a result of service disruption.

It also revealed that as of 25 July, it received 135,403 complaints since the migration but has set up a dedicated team of more than 260 people to look at every customer complaint on an individual basis.

In its half year results published today, TSB also said around 26,000 customers switched their bank accounts to other lenders.

However, it added that 20,000 customers opened a new bank account or switched their account to TSB in Q2 this year. This is perhaps due to its offer to increase the interest rate on its Classic Plus Account from 3% to 5% from 2 May indefinitely for both new and existing customers.

Total customer deposits stood at £29.6bn, a decrease of £0.9bn (3.1%) compared to December 2017, and £0.4bn (1.2%) year-on-year. However, TSB reported that current account deposits increased year-on-year since the end of December 2017, and since the end of March 2018.

TSB advanced £2.6bn of new mortgages in the six months to the end of June, sinking from £4.1bn in the same period last year.

However, total customer lending over the six months was £31bn, up 2.8% year-on-year.

‘We’ll work tirelessly until we put things right’

Paul Pester, TSB’s CEO, said: “We’re making progress in resolving the service problems customers experienced following our IT migration, and we will continue to work tirelessly until we have put things right.  I know how frustrated many customers have been by what’s happened.  It was not acceptable, and was not the level of service we pride ourselves on – nor was it what our customers have come to expect from TSB.

“It has been a difficult time for customers and I am grateful to them for their patience. Our priority in the second half of the year continues to be putting things right for our customers.  Looking further ahead we are determined to get back to bringing more competition to UK banking and ultimately making banking better for consumers and small businesses.”