Challenger banks flex muscles in current account market

Britain's “challenger” banks today claimed they were having a real impact on the current account market.

Announcing its maiden interim results since its spin-off from Lloyds Banking Group, TSB said it had gained 9% of new current account sign-ups — comfortably ahead of its 6% target.

Santander UK would also like to be regarded as a challenger bank; it claimed 133,000 current account switches in the first half of the year.

However, TSB’s profits declined by 17% to £78.6 million, as costs surged by £62.4 million, with the bank saying that it “no longer benefits from the economies of scale of a larger group”.

Run by Ana Botin, pictured, daughter of the Spanish banking group’s chairman, Emilio Botin, Santander UK’s results were hit by £424 million of write-offs, including £304 million for decommissioning of “redundant systems”.

There were also £70 million of “conduct costs” — mainly increased provisions for payment protection insurance mis-selling.

A gain on the pension scheme partially offset that and pre-tax profits grew by 18% to £545 million. The Spanish parent said first-half profits grew 22% to €2.76 billion (£2.2 billion).