The UK's TSB has chalked up a whacking £107.4 million first half loss as the early costs of its disastrous IT migration to a new Banco Sabadell platform begin to emerge. TSB's notoriously botched migration to the new IT system in April locked customers out of online and mobile customers for over a month and led to a surge in cybercrime as criminals took advantage of the chaos.
In its results statement, the embattled bank says its mobile app, online banking, telephone banking and branch service levels are now "much improved" after the breakdown, although a number of outstanding issues still persist.
For the first six months, TSB has recognised additional post-migration costs, including customer compensation, additional resources and foregone income as a result of waived overdraft fees and interest charges, of £176.4 million.
The bank, which had to bring in a team of firefighters of IBM to help rectify its systems, says it recruited over 1,800 people and redeployed a further 700 staff into customer-facing roles to support customers who felt badly let down by poor communications and service levels in the immediate aftermath of the migration.
Around 26,000 customers switched their bank account away from TSB following the fiasco, although - somewhat surprisingly - more than 20,000 newcomers opened a new account or switched to TSB in the second quarter.
TSB chief Paul Pester says the bank's financial performance in the first half was "significantly impacted" by the IT migration and subsequent service disruption.
In more detail. the deivery of the migration programme resulted in:
- Income from Lloyds Banking Group (LBG) of £318 million, due following TSB's migration from the LBG IT platform.
- This was offset by a charge of £318 million for migration related costs.
- TSB has recognised additional post-migration costs and foregone income to the value of £176.4 million as follows:
- A provision for customer redress, associated remediation resource costs and fraud costs which total £115.8 million;
- Additional resource and advisory costs to support the remediaton of systems and operating defects of £30.7 million;
- Foregone income of £29.9 million related to waived fees and charges as a result of service disruption.
Says pester: : “We’re making progress in resolving the service problems customers experienced following our IT migration, and we will continue to work tirelessly until we have put things right. It has been a difficult time for customers and I am grateful to them for their patience. Our priority in the second half of the year continues to be putting things right for our customers.”