TSB posted a first-half pre-tax profit of £111.6m, down 24.5% on a year ago, due to “lower mortgage margins in challenging market conditions”.
The bank said, “lower mortgage margins in challenging market conditions as well as an increase of £126m in interest paid to our deposit customers in the period, with net interest margin 22 basis points lower than the first half of 2023 at 2.62%”.
It added in a statement that customer loans slipped 0.3% to £36.6bn year on year, but have risen by 1.1% since December.
This rise in the last six months was driven by higher mortgage lending, with stronger application volumes, up 28.7% to £0.9bn, and improved margins in the first half of 2024 compared with the prior year.
The lender, owned by Spanish bank Banco Sabadell, did not detail a full breakdown of its mortgage lending in the first half of the year.
However, it said its mortgage book grew by £400m to £33.7bn over the period, adding that it helped almost 4,000 customers buy a new home, with first-time buyers accounting for 55% of all home loan sales.
The value of applications increased by 22% in the first six months of this year, with completions up 28% from a year ago.
Credit impairment charges fell 31% to £19.1m from the year before, “reflecting an updated and more favourable economic outlook in the first half of 2024”.
Since the lender last reported figures, inflation has returned to the Bank of England’s 2% target, although the base rate remains at a 16-year high of 5.25%.
TSB said: “With inflation falling to more normal levels, there is an increased expectation that interest rates will follow suit. “There is a strong likelihood, however, that rates will remain higher than we have seen in the years preceding the recent rises.”
TSB chief executive Robin Bulloch added that the business “continued to make good progress against our strategy”.
Also today, a group of Northern Rock customers who claim they became “mortgage prisoners” after the lender’s collapse will appear in the High Court to try to get compensation from the bank that bought their loans.
About 2,500 borrowers whose home loans were sold to TSB’s subsidiary Whistletree are involved in a case over what they say are inflated interest rates on their debt.
