Why the return of TSB to the high street feels like shotgun divorce

Forced to split from Lloyds by competition rules, it ought to offer more to customers. By Chiara Cavaglieri and Julian Knight

If you are of a certain age, it is the return of the "bank that likes to say yes"; if you are younger, it is a new player on the high street with a rather archaic name. The Trustee Savings Bank – or TSB for short – is back, nearly two decades after its merger with Lloyds.

This rebirth of the TSB as a brand – on its appearance this week it became the eighth biggest bank in the UK – was greeted with lukewarm headlines; the de-merger feels a little forced for customers and public alike. Both banks will remain part of Lloyds Banking Group until TSB is sold off, which is expected to take place next year; but millions of customers have already been moved across to the TSB brand. Greater competition is usually to the advantage of consumers, but is this really going to be a contender to the five banks currently dominating the market?

The Lloyds group, which also includes Halifax and Bank of Scotland, has been forced to offload its TSB branches under European competition rules. More than 4.6 million customers have now been switched to the new TSB bank, although some people will be customers of both Lloyds Bank and TSB if they opened different accounts at different branches.

The TSB was established in 1810 by the Rev Henry Duncan in Ruthwell, Scotland. The focus then was very much on helping local families and it seems the bank's new mission statement is harking back to former glory.

"Bringing TSB back to the high street means so much more than putting a new sign above the door," said Roy Beale of TSB. "It's about bringing more competition and choice to the high street with a focus on the local customers, local businesses and local communities."

Lloyds chief executive Antonio Horta-Osorio has also described it as a "completely clean bank" but Moveyourmoney.org.uk is not convinced. The consumer campaign group insists this is a case of "new logo, same old bad bank" pointing to the fact that former Lloyds customers have been forced to switch to the new brand.

"It's the same old behaviour, taking customers for granted and not asking them what they want," said Laura Willoughby of moveyourmoney. Suddenly people will not be able to use their local branch as it has rebranded out of existence. There has been no consultation and no option to choose based on individual banking needs."

Ms Willoughby has called on customers to dump both banks, reminding them of a few home truths: a Which? survey of bank customer satisfaction last year gave Lloyds TSB a rating of only 57 per cent; the banks' bonuses topped £365m in 2012 – despite making a loss of over £570m; they had to set aside £7.28bn to cover the cost of PPI compensation; they mis-sold interest-rate swap products to small businesses; and they are currently under investigation for interest rate rigging as part of the Libor scandal.

It is too early to tell whether TSB will be able to separate itself from what has gone before, but the early signs are hardly reassuring – customers' bank account numbers and sort codes have remained the same, but embarrassingly there have already been a few hiccups with customers unable to log in to their online banking services on the first morning of the switch.

More importantly, when it comes to the products on offer, it is business as usual – with no new deals for TSB customers.

Michael Ossei, personal finance expert at uSwitch.com says: "While the relaunch of TSB should provide greater choice, in reality there is little reason to jump for joy, with the rates and products mirroring those of the current Lloyds bank range."

Customers are sitting on the same old Lloyds bank accounts, savings and credit cards, but with a new name – and some of these aren't even close to the best buys. The TSB Cash ISA Saver, for example, pays only 1 per cent AER on deposits of £5,000, while the two-year fixed ISA pays up to 1.90 per cent AER on deposits of £10,000. Nationwide pays a far more generous 2.25 per cent on its easy-access ISA (open to its current account customers) and Britannia offers a two-year fixed ISA also paying 2.25 per cent, rising to 2.60 per cent to Co-operative bank account customers; and both accounts can be opened with minimum deposits of just £1.

The TSB Platinum balance transfer card does offer a competitive deal with 24 months interest-free, but Barclaycard is letting you shift debts for 28 months at 0 per cent. On the current account front, TSB is also being left behind with First Direct offering a permanent £250 interest-free overdraft and a £125 sweetener to new customers switching to them. Nationwide's FlexDirect also has a 0 per cent arranged overdraft, this time for the first 12 months, although both accounts require you to pay in at least £1,000 a month.

At present, TSB doesn't seem a meaningful challenger to the biggest high street banks. It does now have its own banking licence, so if you have money in both Lloyds and TSB you enjoy separate protection for your deposits up to £85,000 under the Financial Services Compensation Scheme should they go bust. Yet both Lloyds and TSB customers should take the opportunity to look at all of their financial products and consider switching elsewhere.

In the UK, 83 per cent of retail bank accounts are controlled by one of five names – Lloyds, RBS, Barclays, HSBC and Santander – all of which have been caught up in scandals such as colossal director bonuses, fixing the Libor interest rate and mis-selling PPI. Current accounts are big business for all of the banks and building societies, but at present it takes as long as 30 working days to switch your account from one bank or building society to another.

This should all change next week, when a new seven-day switching guarantee comes into force. This means that payments going out, such as direct debits, and those coming in, such as your salary, will be moved from your old bank account to the new one within seven working days, making it far less hassle to switch. Hopefully, this will encourage more people to take action and find the best products for their needs.

Various organisations are launching tools to encourage switching including the moveyourmoney Switching Scorecard (ranking banks on customer service, impact on the economy, culture and ethics) and the Money Advice Service has a new current account comparison table which will be available from tomorrow (moneyadviceservice.org.uk).

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Digital Optimisation Executive - Marketing

    £30000 - £35000 per annum: Recruitment Genius: The UK's fastest growing, multi...

    Recruitment Genius: Financial Reporting Manager

    £70000 - £90000 per annum: Recruitment Genius: A Financial Reporting Manager i...

    Recruitment Genius: Payments Operations Assistant

    £23000 - £25000 per annum: Recruitment Genius: They win lots of awards for the...

    Recruitment Genius: Telephone Debt Negotiator

    £13500 - £20000 per annum: Recruitment Genius: This nationwide enforcement com...

    Day In a Page

    On your feet! Spending at least two hours a day standing reduces the risk of heart attacks, cancer and diabetes, according to new research

    On your feet!

    Spending half the day standing 'reduces risk of heart attacks and cancer'
    Liverpool close in on Milner signing

    Liverpool close in on Milner signing

    Reds baulk at Christian Benteke £32.5m release clause
    With scores of surgeries closing, what hope is there for the David Cameron's promise of 5,000 more GPs and a 24/7 NHS?

    The big NHS question

    Why are there so few new GPs when so many want to study medicine?
    Big knickers are back: Thongs ain't what they used to be

    Thongs ain't what they used to be

    Big knickers are back
    Thurston Moore interview

    Thurston Moore interview

    On living in London, Sonic Youth and musical memoirs
    In full bloom

    In full bloom

    Floral print womenswear
    From leading man to Elephant Man, Bradley Cooper is terrific

    From leading man to Elephant Man

    Bradley Cooper is terrific
    In this the person to restore our trust in the banks?

    In this the person to restore our trust in the banks?

    Dame Colette Bowe - interview
    When do the creative juices dry up?

    When do the creative juices dry up?

    David Lodge thinks he knows
    The 'Cher moment' happening across fashion just now

    Fashion's Cher moment

    Ageing beauty will always be more classy than all that booty
    Thousands of teenage girls enduring debilitating illnesses after routine school cancer vaccination

    Health fears over school cancer jab

    Shock new Freedom of Information figures show how thousands of girls have suffered serious symptoms after routine HPV injection
    Fifa President Sepp Blatter warns his opponents: 'I forgive everyone, but I don't forget'

    'I forgive everyone, but I don't forget'

    Fifa president Sepp Blatter issues defiant warning to opponents
    Extreme summer temperatures will soon cause deaths of up to 1,700 more Britons a year, says government report

    Weather warning

    Extreme summer temperatures will soon cause deaths of up to 1,700 more Britons a year, says government report
    LSD: Speaking to volunteer users of the drug as trials get underway to see if it cures depression and addiction

    High hopes for LSD

    Meet the volunteer users helping to see if it cures depression and addiction
    German soldier who died fighting for UK in Battle of Waterloo should be removed from museum display and given dignified funeral, say historians

    Saving Private Brandt

    A Belgian museum's display of the skeleton of a soldier killed at Waterloo prompts calls for him to be given a dignified funeral