TSB has confirmed for the first time that its cost income ratio is too high and needs to be reduced significantly over the next few years if it’s to survive.

A new Chief Executive is normally given a period of grace to devise a new approach, blame the previous job holder for all the problems and then allowed a period of time to implement that strategy. That’s not going to happen in TSB. The new Chief Executive has been brought in to reduce costs – by cutting staff numbers and closing branches – and setting the business up for either a sale or merger. That’s it, full stop.

In a recent teleconference to staff and managers, Ralph Coates, TSB’s Chief Financial Officer, said:

“We have a very high cost income ratio relative to our competitors. In simple terms that’s important because it means that for every pound of income we generate, we spend almost all of it in the cost to deliver that pound of income. It’s important we are competitive or try and get a better position on our costs and make ourselves fit and safe to compete. We need to look at how we run our business in a more efficient manner, partly by looking at how we adapt our organisation structures, simplify our working practices and in other areas remove silos…”

What we find remarkable about this startling admission of failure is that Mr Coates has been the Chief Financial Officer since July 2016. When he joined TSB the cost income ratio was 75.5%. In 2017 it was 76%. The latest figure shows the ratio is now 92.9%. When TSB was first set up in 2014 the cost income ratio was 75.1%.   If costs have been allowed to spiral out of control, or haven’t been tackled at all in any meaningful way for years, then it’s the Chief Financial Officer’s fault. Equally, the TSB Board must shoulder their share of responsibility for not taking control and tackling the problem earlier.  Furthermore, the big increase in the cost income ratio between 2017 and 2018 was primarily about the costs of preparing for IT migration and then dealing with the shambles afterwards. Those costs will continue into 2019, and possibly 2020.

But let’s be clear, when employers talk about reducing the cost income ratio that means job losses. When Antonio Horta-Osorio became Group Chief Executive of Lloyds Banking Group he said the cost income ratio was too high. He stopped everyone using colour photocopying and then set about getting rid of 35,000 jobs. LBG’s cost income ratio is now 15% lower than it was in 2010.

When all is said and done, it will be the hardworking TSB staff, whether they be in Gresham Street, Bristol, Sunderland, Edinburgh, Swansea or Birmingham and branch staff across the country, who will pay with their jobs for the failure of the BEC to implement a new IT platform properly and for not growing the business over the last few years. If there was any justice in this world, then most of the BEC would be the first to lose their jobs.

When we first said 2 years ago that following migration the bank would cut costs drastically, we were accused of scaremongering by both TSB and Accord. Unfortunately for staff, our predictions have been proved right.

In our next Newsletter we will discuss the changes to the job security policy – agreed by the HR approved union Accord – which will make it easier for TSB to get rid of staff. Members with any questions can contact the Union’s Advice Team on 01234 716029 (Choose Option 1).

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