LONDON: New British bank TSB said it was picking up nearly one in ten of all new current accounts being opened in the UK, swelling its deposit base as competition intensifies for the country's biggest lenders.
As a result, the bank hived off from Lloyds Banking Group to challenge dominant lenders said it was ahead of a target to grow its share of Britons' personal current accounts to 6 percent in the next five years.
Lloyds was forced by European regulators to sell the 631 branches which now form TSB as a condition of receiving state aid during the financial crisis of 2007 to 2009.
The move created Britain's seventh-biggest high street bank with a 4.2 percent share of the personal current account market.
TSB, which listed in June, said on Friday that its 9.7 percent share of new current account openings during the third quarter of 2014 put it on track to grow further.
"We feel that rate of current account openings may well fall back but the 6 percent target appears eminently feasible, in our view," said Mirabaud Securities analyst Alex Potter.
The bank has heavily promoted its 'Classic Plus' current account, which offers 5 percent annual interest on balances up to 2,000 pounds(around $3,200), higher than many rivals. It said the success of the advertising and media campaign had helped it grow customer deposits by 500 million pounds to 24.2 billion.
British regulators are keen for new banks to challenge Britain's big four lenders - Lloyds, Royal Bank of Scotland , Barclays and HSBC, which provide three-quarters of personal current accounts. Sweden's Handelsbanken and Britain's Metro Bank, two other rivals for the big four, reported a surge in lending to UK households and businesses this week.
ONE IN TEN Andrew Tyrie, chairman of the UK parliament's Treasury Select Committee, said this week that there was a danger that TSB might struggle to grow significantly and to act as a significant challenger in the market.
TSB's Chief Executive Paul Pester responded on Friday by saying it was well-placed to compete with the bigger banks.
"We have everything we need in order to enable us to be a real competitor in the UK market and to reinforce our position as Britain's challenger bank. The fact that 1 in 10 customers to switch to us is a very good sign of that," he said.
TSB said its pretax profit rose to 33.1 million pounds ($53 million), up 29 percent from the second quarter. Underlying profit rose by 32 percent to 41.6 million.
However, net lending fell by 300 million pounds to 19.1 billion pounds - a drop the bank said that was expected because it has not yet started to offer its mortgages through independent brokers. The bank said it was on track to achieve its target of starting to sell mortgages through brokers in January 2015.
It expects its mortgage book to start growing again in 2016. TSB wants to increase its balance sheet by 40 to 50 percent over the next five years.
Lloyds sold a 38.5 percent stake in TSB through a stock market flotation of the business in June followed by the sale of a further 11.5 percent shareholding in September. It must sell the rest of the shares by the end of 2015.
Shares in TSB were trading at 262.7 pence, up 1.5 percent at 0840 GMT.
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