TSB has released its 2021 Annual Results, marked by a good profit lift and a shift from the internal work to 'strengthen its foundations'. But is still lags industry performance benchmarks and is gradually losing market share

TSB has released its March 2022 Annual results.

They reveal an annual tax-paid profit of $38.1 mln, a +6.9% rise from the $35.6 mln in the March 2021 year.

Like all banks, these results come against the backdrop of significant regulatory developments within the banking industry, following the implementation of changes to the Credit Contracts and Consumer Finance Act (CCCFA).

TSB Chair Mark Darrow says there is no doubt the CCCFA changes had an impact on the bank and its customers.

TSB is the very definition of a 'mortgage bank'. It's lending is skewed 87.8% towards residential mortgages, up from 86.5% in 2021.

But despite this focus, it is slowly losing market share. Using the RBNZ's C5 data as the base, it had a nationwide home loan market share of 1.77% as at March 2022, down fractionally from 2021, and down from 1.88% as at the year to March 2020.

It also lags in margin performance. The RBNZ Dashboard shows an overall Net Interest Margin (NIM) at 1.9% when most of the large banks are running at 2.1%. But this is a minor improvement from 1.8% over the prior four years. Other challenger banks like SBS Bank have a NIM at 2.6%, Heartland at 4.5% and the Cooperative Bank at 2.3%.

Overall, TSB's return on equity was 5.3% for the full year, but that masked a tough end to the year. In the March 2022 quarter it was only 2.5% (as revealed by the RBNZ Dashboard data), after Dec-21 at 4.8%, Sep-21 at 6.5% and Jun-21 at 7.0%. It's a trend that is sure to concern their Board. Most large banks report a return on equity of 14%-15% (Westpac 11%). 

Darrow said: "The last financial year saw a major compliance uplift, a significant upgrade of our systems and technology, an ongoing COVID-19 response and considerable regulatory developments in the New Zealand banking industry."

They seem sure the recent internal focus to improve its operations are about to shift their performance significantly. CEO Donna Cooper said: "As a result of the work to strengthen its foundations, TSB is set to turn up the dial on customer service, alongside the release of key products and innovations."

"There is no doubt that the past 12 months have required some brave decisions about our priorities and resources."

“There will continue to be challenges to overcome, but we’re in the best possible position to move this very special bank forward. It’s a fantastic place to be.”