TSB Bank announced its statutory loss before tax in 2020 was £204.6m ($281m), down from £46m profit a year ago, with financial performance “significantly impacted” by the coronavirus pandemic.
It said its priority in 2021 is to deliver on its growth strategy and returning to profitability.
TSB, owned by Banco Sabadell (SAB.MC) explained part of the loss was due to a £90.1m reduction in its total income to £894.8m year-on-year, which “primarily reflects the adoption of government and regulatory measures in response to COVID-19, lower overdraft income from regulatory driven pricing changes, lower interest rates and reduced consumer spending.”
It added that a £46.9m increase in restructuring charges to £90.6m was due to “an acceleration in the pace of branch transformation and changes to organisational design.”
TSB closed 93 branches in 2020 and announced plans to “right-size and modernise our branch network” with further closures in 2021.
"COVID-19 has had a severe impact on the retail banking sector, and there has been pressure from regulators for banks to be sympathetic when enforcing consumer loans, and also to keep the branch network open,” noted Ian Mason, partner and head of UK financial services regulatory team at law firm Gowling WLG.
Meanwhile, total customer lending at £33.3bn increased by £2.2bn, driven by growth in core mortgages and business lending through the government’s Bounce Back Loan Scheme.
It said its support for small and medium-sized businesses through the scheme reached more than 20,000 businesses with over £500m of lending.
To support customers impacted by the pandemic, it granted 40,000 mortgage payment holidays and 74,000 personal loan and credit card payment holidays.
Customer deposits at £34.4bn increased by £4.2bn due to reduced customer spending and growth in business deposits as businesses maintained high levels of liquidity.
Underlying operating expenses of £827.7m were down 2.3%, “reflecting TSB’s ongoing progress on efficiency, partly offset by increased investment in enhanced digital capability.”
Given that customers are moving online, TSB highlighted that it has two million digitally active customers and that over 90% of transactions are processed through digital or automated channels. Over 70% of sales are also now through digital channels.
CEO Debbie Crosbie, said: "TSB’s underlying performance is 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. However, the impact of the pandemic and the additional cost of restructuring overshadows our financial result for the year.”
The bank said that the UK is entering 2021 in a deep economic downturn with ongoing challenges from the continuing impact of COVID-19, the implementation of Brexit and a low interest rate environment.
But it said it remains a “low risk, well-capitalised bank and has potential for significant value creation in the future.”
WATCH: What is the Bounce Back Loan scheme?