TSB boss: Current account switching must be simpler

TSB’s maiden profit of £133.7 million - an increase of 2.3% - was better than analysts had expected

Simpler switching came into force in September 2013 but so far just 3% of all current accounts have been switched (Getty Images)

The head of TSB, the challenger bank separated from Lloyds Banking Group last summer, called for current account switching to be made even simpler yesterday.

Paul Pester, the chief executive of TSB, said: "We gained almost 500,000 new bank accounts during 2014 but many of those did not use the switching service. Awareness of the switching service generally has dropped from 60 per cent to a paltry 16 per cent.

"We have suggested specific improvements to the Competition and Markets Authority. In particular you still cannot switch an overdraft."

Lloyds was ordered by Brussels to sell off 632 branches because of the state aid involved in its 2009 bailout.

Originally it agreed to sell the branches to Co-op Bank for £750m but the mutual, chaired by the crystal meth minister Paul Flowers, then imploded with a £1.5bn black hole. Lloyds turned instead to a flotation. It sold 38.5 per cent of TSB at 260p a share in June and a further 11.5 per cent at 280p a share in September. Lloyds has already raised £1.46bn from the sale. It has to sell off the remaining 50 per cent of TSB, which it still owns, by the end of this year.

TSB’s maiden profit of £133.7m – an increase of 2.3 per cent – was better than analysts had expected.

Mr Pester said that the bank’s re-entry into the mortgage market through brokers had gone well, with applications for £300m worth of home loans. For 2014, lending dropped 6 per cent to £18.8bn but Mr Pester expects that to steady and then start growing again during the second half of this year.

He declined to comment on reports that TSB had approached rival challenger bank Aldermore with a view to buying it before its float plan was revived yesterday. But he said: "We are all about growth. If we can find the right thing at the right price we would be interested."

TSB said it will reduce its costs from £750m to £720m in the present financial year. As Mr Pester explained: "Base rates are lower and are likely to remain lower for longer than we expected."

TSB shares fell 1.60p to 259.6p.