TSB’s cost-cutting plans helped the bank withstand a “competitive mortgage market” as the high street lender reported a record year.

TSB’s pretax profit increased to £290.4m, 22 per cent higher than the year before and a record since the bank returned to the high street in 2013.

This came even as income fell slightly to £1.1bn from £1.2bn in 2023, which the bank said reflected “lower mortgage margins in a highly competitive market”.

The improvement in profit came thanks to lower costs. TSB said operating expenses had fallen by 3.6 per cent to £821.9m, down from £852.9m last year.

“A continued focus on costs and lower restructuring costs helped to mitigate the impact of higher inflation, one-off costs and the new Bank of England levy,” it said.

Credit impairment charges also fell by 44 per cent to £30.1m, reflecting an improving economic outlook and lower risk from its unsecured portfolio as cost-of-living pressures ease.

The bank’s net interest margin (NIM) fell by seven basis points to 2.68 per cent compared to 2023, although margins actually improved throughout each quarter in 2024.

NIM measures the difference between what banks pay on deposits and what they earn from loans and other assets. By the fourth quarter, the bank’s NIM stood at 2.77 per cent.

Most banks have seen margins improve in recent years thanks to the Bank of England’s interest rate hikes. The prospect of fewer rate hikes will likely prove a tailwind for many lenders.

“Market expectations have been unstable, but imply that the Bank Rate will remain higher than in the years preceding the recent rises,” the bank said.

TSB said it would pay a £300m dividend to Spanish bank Sabadell, its parent company. Sabadell is attempting to fend off a hostile takeover from BBVA.

“I am delighted that TSB has delivered another year of record results. We are confident that we can achieve our future growth ambitions through better supporting customers with their financial goals, while continuing to make the business fit for the future,” Robin Bulloch, TSB’s chief executive said.