TSB has reported a record statutory profit before tax of £183.5 million for 2022, up 16.5% on 2021, and said it proposes to pay Spanish parent firm Sabadell a dividend for the first time.

“This includes the impact of the fine from the FCA and PRA of £48.7 million relating to the 2018 migration programme,” said TSB.

“Profit measured on a management basis increased from £182.6 million to £271.6 million, up 49% year on year.”

TSB said it proposes to pay a dividend of £50 million to its parent company in the first quarter of 2023, subject to shareholder and regulatory approval.

Total 2022 statutory income for TSB increased £122.9 million to £1.108 billion “primarily reflecting the impact of lending growth and higher interest rates and deposit margins. ”

This was partially offset by lower mortgage margins in a highly competitive market. Net interest margin increased 13 basis points in 2022 to 2.57%.

“On a statutory basis, TSB’s costs have increased by £42.1 million (+5.1%) to £869.5 million in 2022, driven by the £48.7 million fine concluding the joint FCA and PRA investigation into the 2018 migration programme, as well as higher conduct-related costs,” said TSB.

“However, TSB’s operating costs measured on a management basis reduced by £21.0 million (-2.6%) to £776.3 million despite inflationary pressures, reflecting continued progress in simplifying the business.

“Efficiencies have been made through reducing resource costs, lower property costs across the branch network, and reviewing supplier contracts.

“TSB’s cost-to-income ratio (management basis) has improved by 11 percentage points to 70.4% (2021: 81.4%).

“Credit impairment charges of £54.9 million increased significantly versus 2021 (£0.1 million), when the bank had exceptionally low charges following Covid-related impairment releases.

“The 2022 charge reflects the uncertain economic outlook and growing inflationary pressures for our customers. However, TSB is yet to see this translate to a marked increase in customers experiencing financial difficulties or missing payments.

“Total customer lending increased £0.7 billion (+1.8%) to £38.1 billion in 2022. Core mortgages continued to grow despite management actions to manage volume in a highly volatile and competitive mortgage market.

“Lending balances were also impacted by increased mortgage repayments and early redemptions as customers sought to fix to new products ahead of maturity in the rapidly rising interest rate environment.

“Customer deposits increased by £0.4 billion (+1.1%) to £36.3 billion reflecting strong growth in retail savings and, in particular, customers taking advantage of TSB’s competitively priced fixed rate products.

“This offset a reduction in current account balances, reflecting increased customer spending as the UK emerged from the Covid-19 pandemic, together with the higher cost of living.

“The balance sheet remains resilient with a Common Equity Tier 1 ratio of 17.1% and Liquidity Coverage ratio of 195.8%.”

TSB CEO Robin Bulloch said: “In challenging and unpredictable economic circumstances, TSB continues to be a relevant, purpose-driven brand offering the banking products and services our customers need most.

“With a relentless focus on improving our service, and more satisfied customers, we have delivered a strong set of results for 2022.

“This includes balance sheet growth, reduced underlying costs, and improved overall profitability. And, for the first time, TSB will pay a dividend to our parent company, Sabadell.

“I want to thank all of my colleagues for rising to meet the challenges of the past year and helping to build our customers’ money confidence, at a time when this has never been more important, as well as enthusiastically getting behind our growth strategy for the coming years.”