TSB computer meltdown bill rises to £330m | Business

The cost of TSB’s computer systems meltdown rose to £330m during 2018, pushing the bank to a large loss for the year.

No bonuses will be paid to TSB executives for 2018, the bank said, as it reported a statutory loss before tax of £105.4m, compared with a profit of £162.7m in 2017. Staff received a bonus of £1,500 each before Christmas to reward them for handling the fallout from the IT problems.

The bank, which is owned by Spain’s Banco de Sabadell, had a torrid year as it tried to migrate customers from TSB’s former owner, Lloyds Banking Group, on to a new system. The botched move in April resulted in up to 1.9 million customers being locked out of their current accounts for weeks.

Paul Pester resigned as TSB chief executive in September following intense criticism from regulators and MPs. Pester gave up 2018 bonuses related to the migration, but will still receive £801,030 in notice payments this year.

More than 20,000 customer complaints remain unresolved, from the 204,000-plus received since the migration. TSB said it had received four times more complaints than otherwise expected, although complaints have returned closer to pre-migration levels even as IT issues have continued.

The bill for customer compensation has reached £125m, while the bank experienced £49.1m in fraud. It also had to spend £122m to hire new staff to handle the deluge of complaints, as well as £33.5m in foregone fees in an attempt to retain customers.

Yet TSB still managed to grow to 5 million customers over the year. About 140,000 people opened a new bank account or switched their account to TSB, compared with about 80,000 who moved away.

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TSB said the costs of the migration would be partially offset by the provisional recovery of £153m in compensation from its Sabadell-owned IT provider, Sabis, after reports of tensions with the parent company.

Richard Meddings, the TSB executive chairman, said the bank is in the “design phase” of a plan to take more control of its IT systems from Sabis, but insisted the working relationship between TSB and Sabadell remains “very good”.

The move could potentially make the bank easier to sell for Sabadell, after the parent company’s chairman, Josep Oliu, raised the prospect in December of a “consolidation” once TSB is profitable. Sabadell bought the bank in 2015 for £1.7bn.

TSB does not anticipate significant further costs related to the migration, despite the large remaining backlog of complaints, but it is still awaiting the outcome of two investigations.

It commissioned a report into the migration by the law firm Slaughter and May, which is expected in the coming weeks, but the bank could receive a large fine from the Financial Conduct Authority, which is investigating TSB’s handling of the debacle. The bank did not include any provision for a possible fine in its finances for 2018.

The City regulator has previously given out large fines to banks where IT outages have inconvenienced customers, most notably the £56m fine for Royal Bank of Scotland (RBS) in 2014 under similar circumstances.

TSB is aiming to move on from the disaster. It appointed a new chief executive, Debbie Crosbie, in November, who will join in the spring, the bank said.

Meddings, who temporarily took over the running of the bank after Pester’s departure, said: “Last year was TSB’s most challenging year.”

Meddings also said the bank was planning to make a “significant move into business banking”, as it bids for part of £425m in grants that RBS was forced to pay out to address competition concerns.

City analysts had judged TSB to be a frontrunner for the awards of up to £120m per bank, which are hoped to improve the market for small business banking. However, the migration issues are thought to have dented its hopes for the larger awards.

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