The bank also reported a £100m increase in core mortgage growth for 2024, a 0.2% increase on the year before.
TSB’s annual results said this muted growth was despite the “challenging” mortgage market, adding that its book had stabilised following the previous year’s £1.5bn decline in mortgage balances.
The bank said the mortgage market was still very competitive, with squeezed margins impacting lenders. It reported that the average rate earned on mortgages last year rose from 2.98% in 2023 to 3.63%.
However, it saw a better performance in the second half of 2024 and, over the year, helped 7,600 first-time buyers.
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Surge in profit before tax
TSB reported a statutory profit before tax of £285.1m, a 21.1% increase on the year before.
It said this reflected ongoing cost control, including a 3.6% decline in operating expenses and a 55.9% decrease in impairment losses, due to the improved economic outlook. These were partially offset by a lower income due to lower mortgage margins in the competitive market, it said.
Its net interest margin fell from 2.75% to 2.68%, and its net interest income contracted by 3.7% to £984.4m.
Robin Bulloch, TSB’s chief executive, said: “I am delighted that TSB has delivered another year of record results. We are confident that we can achieve our future growth ambitions through better supporting customers with their financial goals, while continuing to make the business fit for the future.
“I want to thank all my colleagues for their contributions over the past year and for the dedication they continue to show in serving our customers now and into the future.”
Keeping an eye on mortgage-related risks
TSB said although it was not “materially affected” by climate risk in the short term, it was impact assessing physical risks on new mortgage lending. It said this would identify exposures within its risk appetite.
It said while risk and loss were low, flooding and rain would be the main physical risk of concern.
It also said risks could come from the poor energy performance of properties, such as the cost of not improving the energy-efficiency rating and moving to clean heat.
Although neither had been a priority in the house buying and selling process or part of valuations before 2019, TSB said market sentiments were changing and there was a correlation between the speed of property sale and Energy Performance Certificate (EPC) rating.
TSB added: “We also monitor evolving policy and regulations around climate change and recognise that these may be updated in the short to medium term under the new government.”
Today, the government announced it was consulting on improving EPCs in the private rental sector.
‘Mortgage prisoner’ legal challenges
TSB said it was currently managing complaints and court claims related to the portfolio of ex-Northern Rock residential mortgages, which had been acquired from the Cerberus Capital Management group, otherwise known as the Whistletree portfolio.
The bank said it would “defend the claims rigorously” but did not expect the resolution of any claims to have a material adverse impact on its financial position.
It said it would explore opportunities to seek recovery from third parties of losses arising from or related to these matters.
For example, it is seeking recovery from a third party under an indemnity arrangement for certain remediation conduct costs related to the treatment of customers in the collections and recoveries function.
