IT meltdown pushes TSB into the red

TSB swung to a loss in the first half of the year, having been “significantly impacted” by a major IT migration that sparked a banking meltdown in April.

The bank – owned by Spanish lender Sabadell – logged a bottom-line pre-tax loss of £107.4 million for the six months to June 30, compared with a profit of £108.3m during the same period last year.

Its dismal performance comes after taking a £176.4m hit linked to its IT migration failures, accounting for customer compensation, foregone income after waiving fees and charges as a result of the service disruption, plus the cost of trying to fix system defects.

TSB said it has now put together a team of more than 260 people to ensure customers are compensated properly and as quickly as possible.

Up to 1.9m people using TSB’s digital and mobile banking found themselves locked out of their accounts following the migration of data on customers from former owner Lloyds’ IT system to a new Sabadell-managed platform. Branch services were also affected.

The lender did receive £318m from Lloyds after extricating itself from its former owner’s platform, but that income was completely offset by the costs linked to the migration.

TSB’s failures have drawn strong criticism from politicians, including those on the Treasury Select Committee, who have been scathing in their condemnation and called for TSB’s chief executive, Paul Pester, to be sacked.

Mr Pester said the lender was making progress in resolving the problems.

“We will continue to work tirelessly until we have put things right,” Mr Pester said.

“I know how frustrated many customers have been by what’s happened.

“It was not acceptable and was not the level of service that 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.”

While around 20,000 customers opened a new bank account or switched their account to TSB in the second quarter – the period during which the bulk of the disruptions took place – 26,000 switched away from the beleaguered lender.

Total customer deposits fell by 3.1% to £29.6 billion compared with the end of December and fell by 1.2% year on year.

TSB chief executive Paul Pester.