Local banking for local people may sound like something out of the League of Gentlemen TV series, but TSB hopes the strategy will help it stand out from the crowd. The challenger bank, which spun out of Lloyds Banking Group and floated in June, is attempting to expand its loan book to match its cost base, but analysts fear this could hit its margins.
Analysts at Berenberg bank said: “TSB is not alone in its quest for market share. Many other challenger banks are looking to compete, while the incumbent banks’ commitment to growth means they will be unwilling to sacrifice market share… Margins will thus come under pressure as banks compete on price. We believe TSB will be unable to offset this with lower funding costs.”
TSB, which reports third-quarter figures on Friday, plans to add around 30 branches to its 600-strong estate, which the City thinks could raise costs further. Meanwhile, TSB has underperformed since its float, with one investor telling Investec’s Ian Gordon that the bank is “simply too boring”. Gordon, however, sees that as a virtue and, given the past financial shenanigans in the sector, who can blame him? However, the shares may continue to go nowhere fast since Lloyds must sell its remaining 50% stake by the end of 2015.
