Bank bosses demand cut in new surcharge on profits

THE bosses of challenger bank TSB and Yorkshire Building Society have urged the Chancellor to water down plans for a new surchange on bank profits, warning that it will stifle competition.

TSB boss Paul Pester and Yorkshire Building Society chief executive Chris Pilling both used their latest results as a platform to urge George Osborne to back down on plans to charge UK banks 8pc on profits over £25m.

The new tax is part of a shakeup of the bank levy, which has been criticised for penalising global banks such as HSBC because it is charged on worldwide assets.

Both men said the surcharge, announced in the emergency budget earlier this month and set to come into force next year, would make it more difficult for them to take on the biggest high street lenders. Pester, pictured, said that he supported the new tax but said the Government should consider raising the threshold at which it kicks in to about £200m or £250m.

He said: ‘It takes a big chunk off our profits, it makes it more difficult for us to invest to grow and to bring more competition to the UK market.’

The comments came as TSB announced profits of £23.2m in the first half of the year, down 44pc from the second half of last year. This fall was largely due to £14m of costs related to its takeover by Spanish lender Sabadell.

The challenger bank boasted a surge in mortgage lending but its share of new personal bank accounts declined from 7.9pc in the first quarter to 6.7pc in the second quarter.

Pilling added Osborne’s surcharge would ‘unfairly hit the six largest building societies’, which he said would pay around a third of the extra £1.7bn expected to be raised by the tax over five years.

Yorkshire said it made a £111.2m profit in the first half of the year, down 5pc on last year.

South East and London-based challenger Metro Bank made another £8m loss in the second quarter but said it is on course to make a profit for the first time next year.