TSB Could See New Management Team After Turnaround

  • Mar 29, 2019 GMT
  • Team Kalkine
TSB Could See New Management Team After Turnaround

Troubled British bank TSB could undergo a change of hands post completion of its turnaround plan, according to Josep Oliu, chairman of Spain's Banco Sabadell, its parent company. He told local media that the bank could be sold in about three years' time after it has been turned around and costs have been cut, which would return the bank to good health following an IT disaster last year. Mr Oliu had previously said it would only consider acquisitions and would not be interested in a sale as the bank would benefit from the greater scale offered by a combination. 

Sabadell, in a deal worth for £1.7 billion, had bought the British bank in 2015 with an intention to challenge incumbent retail banks and expand into the British banking market. But an IT glitch, which forced the bank to hire 2,100 staff to help fix the problem, left thousands of TSB customers unable to access their accounts online for weeks. The bank had to face an increased cost which contributed to the losses of 240 million euros reported last year. Moreover, low-interest rates along with economic uncertainty linked to Brexit has added to the problems faced by it.

Debbie Crosbie, who is expected to assume the role of Chief Operating Officer at TSB in about a month, will work on a plan to slash costs at the loss-making bank. Cost-cutting measures are expected to include potential staff cuts and relocations, along with a small reduction in TSB's branches in Britain. Crosbie plans to bring down cost-to-income ratio, which had shot up to 93% from 76% the year prior, closer to the low 50s in two or three years.

A day before Sabadell's annual shareholder meeting, Chairman Josep Oliu said that the retail bank has a "costly structure" and would require 3 years to achieve adequate return before it can enter a consolidation process, adding "a merger or a sale are options". He added that TSB is not expected to positively contribute to the parent group's earnings until 2020. Sabadell's CEO Jaime Guardiola informed, because of the bank's persistent problems, Sabadell had postponed its target to achieve a return on tangible equity of 13 per cent by one year to 2021.

Last summer, the IT-upgrade debacle at TSB had strained relations between Sabadell and TSB's leadership, leading to speculations that members of the bank's leadership had started questioning whether it has a future as part of the Spanish group. However, Richard Meddings, TSB's chairman, had downplayed the disagreement and had compared it to "a family row". The parent company had reaffirmed the point and added that the bank was a core part of the Sabadell Group.

According to TSB, it has recovered from recent difficulties and hopes to be a strong challenger bank in 2019. A person close to the bank said it was surprised by Mr Oliu's comments.

Mr. Oliu also did not rule out a potential merger between Sabadell itself and Bankia, which is majority-owned by the Spanish government.

TSB's problems and concerns about weak capital levels have weighed on overall results at parent group, as shares in Sabadell have fallen 47 per cent over the past 12 months. Sabadell recently reported a 54 per cent drop in full-year net profits, to €328 million.

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