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Summary
- The TSB bank has declared it will be closing nearly 164 of its branches in the UK and cutting 1000 staff members, because of a decline in the number of customers visiting these branches.
- Since the outbreak of the Coronavirus, more and more people are opting to bank online to avoid coming in contact with strangers, which is the result several banks have been witnessing a drop in demand for many of the services.
- There has been a massive shrinkage in the number of banking outlets in the UK in the past five years, with nearly 6,500 branches operating in January 2020 from 9,806 branches operating in January 2015.
Following the footsteps of its peers in the banking industry, TSB bank has announced that it will shut down nearly 164 of its branches and shed nearly 1,000 of its staff. Blaming a drop in customers numbers visiting its high street branches, many of its services deliverable across counter are becoming less incidental in contributing to its revenues. With more and more people transacting online either because of convenience or due to the fear of catching the pandemic infection, many of the traditional banking services have become an abode of only the old and less modern customers who are experiencing trouble transacting online. There has been a massive shrinkage in the number of banking outlets in the UK in the past five years, with nearly 6,500 branches operating in January 2020 from 9,806 branches operating in January 2015.
It is worth noting that TSB and several other banks in the country are already making the role of a dedicated bank cashier redundant, as the prevalence of online purchasing, mobile transacting, and ATM (Automatic Teller Machines) has increased significantly among people. It is also worth noting here that the outbreak of the coronavirus pandemic has accelerated several changes in the transacting behaviour of people, as they are adapting to technology at a very fast pace than they did in the past few years. The bank, which is currently owned by Banco Sabadell of Spain, is not listed on the London Stock Exchange.
The Current State of Affairs at TSB Bank in the UK
The banking company has relatively underperformed in the first half of 2020 compared to the first of FY 2019. On 31 July 2020, the bank came out with its half-yearly results for the year 2020. The total income of the company for the period stood at £445.5 million, compared to £505.9 million reported for H1 of 2019, which is a drop of 11.9 per cent. The operating expenses of the bank for the period stood at £418.2 million compared to £428.8 million reported for H1 in 2019, which is a drop is 1.6 per cent.
The statutory loss before tax suffered by the company for the period stood at £65.5 million compared to a statutory profit before tax of £21.1 million earned by the company in H1 2019 which depicts a fall of 410.4 per cent. The Net Interest Margin (NIM) of the bank for the period stood at 2.49 per cent compared to 2.76 per cent for H1 2019, which is lower by 27 basis points.
The asset quality ratio of the bank, however, went up and at the end of H1 2020, it stood at 0.72 per cent compared to asset quality ratio of 0.16 per cent at the end of H1 2019. The impairment losses suffered by the bank during H1 2020 stood at £111.00 million compared to £23.5 million of impairment losses suffered during H1 2019, which is an increase of 372.3 per cent. However, as on 30 June 2020, the total customer lending of the bank stood at £31.261 billion compared to a total customer lending of £30.367 billion as on 30 June 2019 which is a growth of 2.9 per cent. Similarly, the total customer deposits with the bank as on 30 June 2020 stood at £32.909 billion compared to £29.848 billion, which is a growth of 10.3 per cent. This signifies that the credit offtake of the bank in the first half of 2020 has been sluggish compared to the customer deposits the bank has received during the period.
The transition taking place in the Banking industry because of the coronavirus pandemic
The banking industry has seen a sea change during the outbreak of the pandemic in the UK as well as other countries. The prevalence of online business increased significantly in the banking industry over the past few months. Most of the government stimulus measures were delivered by the banks to their customers online as physical contact between banking staff and customers were prohibited during the lockdown. Most of the people who needed provisions bought them online through their cards, which also increased the online transaction traffic with the banks significantly.
Since the imposition of the lockdown, most banks increasingly equipped their staff to operate from their homes and took adequate measures to prevent any data breaches. This led to an increase in IT-related expenditure with the banks, while some banks used this opportunity to upgrade their technology suits.
The FCA guidance regarding opening shared locations for underserved communities.
There is, however, a section of the society which is unable to use Online banking due to a variety of reasons. The FCA (Financial Conduct Authority) as well as several lawmakers in the UK have taken up their case and asked the banks to offer their services to these underprivileged communities through either mobile branches or through shared services with post offices. A six-month trial process has been initiated, which begins in October this year whereby bank managers would be sent to post offices in such locations on different days of the week to offer their services.
Outlook
The changes taking place at TSB bank is a phenomenon, something being witnessed across the banking industry throughout the world. TSB is also adapting to these changes on an accelerated pace, and a loss of business of one side is more than proportionately fulfilled by the business from some other vertical. The under-privileged customers, however, are the ones who will be very badly affected by this transition and need special attention by the regulators as well as the government.
