back to article Terribly Sorry Bank reports 165% drop in profits to a pre-tax loss of £105.4m

IT meltdown bank TSB has reported a £105.4m statutory loss this year, a whopping 165 per cent drop from 2017's profit of £162.7m. The firm today released its full-year results for the 12 months to 31 December 2018 – and they do not make pleasant reading for the embattled firm, whose services went down for almost a week in …

  1. Anonymous South African Coward Silver badge

    Wonder if TSB will be able to weather this storm they've created for themselves.

    1. livin' thing
      Facepalm

      Well they're certainly advertising like crazy with that Scottish woman from Trainspotting - all warm fuzzy talk of community, helping and not missing out. I bet she doesn't keep any money with them for a second longer than she has to.

      I'm determined to miss out anything to do with TSB. I don't trust them at all.

      1. defiler Silver badge

        that Scottish woman from Trainspotting

        Whew - glad you could narrow that down...

        1. Locky Silver badge

          I know I'm old, but I'm pretty sure she was the girl from Trainspotting...

          1. Anonymous Coward
            Anonymous Coward

            Kelly Macdonald?

            Right enough, the voice did sound sort of familiar, and it could well be her, but it could quite also be some other Scottish voice over actress with a similar accent?

        2. livin' thing

          Surely I get some credit for mentioning the film!

          1. YetAnotherLocksmith

            From TSB?

    2. BebopWeBop Silver badge

      Well in other business news, they have grown the number of users - at what cost I do not know

  2. Tom 38 Silver badge
    Joke

    Faster to open accounts

    Much less load on the servers processing applications I'd guess..

  3. devTrail

    Who decided such massive change all at once?

    The bank's execs blamed the problems on middleware, but a prior analysis from IBM seemed to point at issues with testing.

    As usual when things go wrong the blame game begins. Sometimes it ends in the tribunal, sometimes it's just a fake exchange of accusation played in order to buy time until people forget the story. But most of the time the real culprit is willingly ignored. In this case I would like to know who decided to migrate the customers all at once, agile approaches are nothing new and stories of failures in too big projects are not a surprise.

    1. gv

      Re: Who decided such massive change all at once?

      Indeed, a controlled, phased migration of customers should have been the strategy here with copious amounts of usage and stress testing and a bullet-proof rollback strategy just in case. I would have thought it would be fairly straightforward to identify the senior director who gave the green light...

      1. Anonymous Coward
        Anonymous Coward

        Re: Who decided such massive change all at once?

        Agile management ?

        1. YetAnotherLocksmith

          Re: Who decided such massive change all at once?

          Definitely Agile Management - the CEO trousered 1.7m as he swanned off into the sunset. Wonder if he has to keep that in TSB for 5 years or anything?

      2. SloppyJesse

        Re: Who decided such massive change all at once?

        Having been involved in a number of banking system migrations albeit with credit cards the idea of a multi-stage migration creates far more problems than it solves.

        The big bang approach is far more straight forward - but you have to get the destination system in order and test, test, test before committing to the live migration.

        This sounds a lot like the project was told to move, or simply ran out of time to prepare before an immovable deadline. Believe they were moving off the Lloyd's platform - bet there were ridiculous financial penalties kicking in for not leaving on time and someone senior made the call to go with the migration and then firefight the issues on the other side.

        1. FozzyBear Silver badge
          Alert

          Re: Who decided such massive change all at once?

          @ SloppyJesse

          Fully agree. Phased Migration is a major pain. Looks like they did not do enough, if any, dress rehearsals for the migration.

          Been involved in 2 migrations. Both with "Immovable deadlines" the first they decided, like TSB, to cut over and deal with the crap afterwards. Big mistake, they were still counting the costs 2 years later.

          The other, project managed by Tweek, with the addition of a major cocaine habit and tourettes. Upper management finally caught onto the mess about 3 months before go-live. At least in that situation they had the balls to pull the plug.

    2. Anonymous Coward
      Anonymous Coward

      Re: Who decided such massive change all at once?

      From previously published accounts of the migration project, they were already running ~2 years behind and were reaching the point where TSB's incumbent system was going to become extremely costly.

      Would another year have helped? They had already used an additional 21 months to get to where they were and the testing hadn't appeared to have identified the issue. They thought they could run on one datacentre and instead ended up using two AND still not being able to meet the load.

      The delays were costing £10m/month in support to Lloyds for the existing system (https://www.theguardian.com/business/nils-pratley-on-finance/2018/apr/24/high-cost-of-more-delay-made-tsb-upgrade-before-it-was-ready) on top of any other project costs.

      If they had waited another year (six months to test and find the issues, six months to re-mediate), costs would have been:

      £250m - initial project cost (likely exceeded)

      £24m - additional staff costs @£2m/month

      £100m - additional hardware costs to remediate performance issues

      £210m - additional running costs of Lloyd's system before testing halted and another year requested

      £120m - additional running costs of Lloyd's system between identifying failed migration

      Total: £704m - almost three times the original cost.

      Put in the same position (I'm guessing the project was likely advising it's almost ready to go live based on testing - I haven't seen anything indicating TSB was aware that the project had significant issues at launch that would prevent it serving the majority of its customers) and how costs were spiraling, it would have taken a lot of convincing to give them more time.

      On the other side of the coin, I doubt anyone identified the project risks as realistically being in the order of £300m-£500m during the final decision to go-live.

      1. devTrail

        Re: Who decided such massive change all at once?

        From previously published accounts of the migration project, they were already running ~2 years behind ...

        Of course. If you want to be able to handle all the possible use cases things can get really complex. It is likely that the decision of a big massive migration was taken at the beginning of the project and the fact that they were 2 years behind was a consequence of it, therefore I don't think this is an explanation of the question I asked.

      2. Ledswinger Silver badge

        Re: Who decided such massive change all at once?

        On the other side of the coin, I doubt anyone identified the project risks as realistically being in the order of £300m-£500m during the final decision to go-live.

        If that's true, it will be because they only listened to a chosen few who would give the right answer.

        I work in a totally different sector. Some years back I watched with curious interest as competitor B spiralled into a similar bind - £200m CRM project with a £700m out-turn, angry customers, regulators, and politicians. Through various circumstance, I now work for company B, and (for reasons too long to explain anonymously), we're now in the same situation of again needing to migrate and "upgrade" a multi-million customer high complexity CRM.

        Company B made an impressive hash of that CRM upgrade, but most of the industry has bruises and accounting writeoffs that show similar experience. Everybody in the sector has access to the same industry history. Everybody knows the painful outcomes of every single CRM upgrade. And yet here we go again, people will ignore the history, ignore my Cassandra predictions, and conclude that they can beat the system, fate, history.

        I'd guess it was the same at TSB. I reckon a few people did say "this is effing mad, it won't work, it'll cost many hundreds of millions and screw our reputation". But those people were not at director or D minus 1 level, and they were ignored, sidelined, invited to leave.

  4. tmTM

    HA HA HA HA HA HA HA HA HA HA HA

    That is all

  5. Anonymous Coward
    Anonymous Coward

    £330 million

    This is what happens if you don't have a DRP.

    1. Ledswinger Silver badge

      Re: £330 million

      I'll wager they did have a DRP, because the PRA should require that. Unfortunately most DRP don't have a chapter titled "Dealing With Wantonly Self Inflicted Fuck Ups".

      But don't forget the £417m on "preparing". Altogether this was a three-quarters of a billion quid mess. Which is quite interesting. If we assume 20% went on hardware and buildings, then we've got £150m of "stuff". And £600m of labour costs. At a guessed blended & fully loaded labour cost of £50 an hour, that means 12 million man hours. Assuming that theirs 1,600 hours annually per FTE, that means the clowns of TSB have put 7,500 man years of effort into creating a local instance of a previously working system, porting the data across, and then trying to sort out the mess. That's epic.

      I supposed TSB should comfort themselves that by the standards of public sector IT this was still a low cost, quick and successful project.

    2. Roland6 Silver badge

      Re: £330 million

      I do hope someone writes a proper report - as this is a really good, but expensively obtained, case study which can be waved at management when they want you to cut corners on production systems go-live...

  6. Thoguht Silver badge

    Terribly Sorry Bank?

    Wouldn't "Tit Sup Bank" have been better?

    And presumably Sabis was once Sabadell Information Services but then got spun out and offshored.

    Full disclosure: yes, I do still bank with that bunch of muppets because 5% interest is hard to come by these days. And really I've not had any serious issues after the first nightmare week.

    1. Brenda McViking
      Flame

      Re: Terribly Sorry Bank?

      As do I. 5% though is only guaranteed for the year, so come April, I think they'll see another mass exodus - I'll certainly be going. Not that their competitors are much better mind.

      And their bloody stupid epilepsy-inducing stickpeople drawings just annoy me.

  7. Anonymous Coward
    Anonymous Coward

    so bad that...

    I mean, seriously; If TSB had to rely on advice from ***IBM*** to tell them what went wrong, it just *HAS* to be in a sorry state.

    1. Anonymous Coward
      Anonymous Coward

      Re: so bad that...

      Advice from IBM that cost them £122m in hardware, software and consulting services.

      IBM do have some talents. A particularly large shovel for removing money from banks being one of them.

      Unfortunately for IBM, banks aren't making these types of mistakes regularly enough to prop up their revenues.

      1. BebopWeBop Silver badge
        Headmaster

        Re: so bad that...

        Well while accepting that INM are frequently f*ck all good at anything other than taking your money, diagnosing the problem is generally (not alway) easier than fixing them.

  8. Charles Smith

    Proper testing?

    I wonder how much it would have cost, other than the Boss's bonus, to have undertaken proper testing of the system before release. A safe rollback escape route would have been useful too. Probably less than £330 Million.

    1. Anonymous Coward
      Anonymous Coward

      Re: Proper testing?

      Part of the testing would have identified the need for an approximate 300% increase in capacity at around £125m, although they may have been able to get a better price if it wasn't required with such urgency.

      Add in a cost of £10-15m a month for costs for the existing Lloyd's systems and on-going testing and development costs. While system capacity was part of the issue, during the performance issues, they also disabled a large number of fraud/compliance/integrity checks to try and workaround the peroformance issues, so multiple rounds of testing/development may have been required to get to where they thought they needed to be.

      And 6+ months to deliver the testing, the required performance uplift and then re-test.

      Do it cheaply and it's maybe £150m in 6 months. Do it to the standard of the rest of the project and it's likely £305m in 12 months.

      Still, it's cheaper than lost customers and goodwill...

  9. Ledswinger Silver badge

    And presumably Sabis was once Sabadell Information Services but then got spun out and offshored.

    The Sabis website states "The projects that we face every day require professionals capable of giving new and different solutions to unusual challenges, breaking with established paradigms. Therefore, our team is made up of extraordinary people with diverse views and huge expertise as project managers. Having become a benchmark in banking integration."

    I'd agree with them, they ARE a benchmark in banking integration, and they MUST have some extraordinary people...just not in any good way.

  10. petercain0110

    Mess

    Oddly enough at our Xmas reunion in 2017 a colleague told us this mess was about to happen.

    He blamed the Spaniards, and a boss who thought the sun shone from his proverbial Spanish IT team. Who in reality had no idea of the difference between elbow and other part of anatomy.

    Mystic Meg he told me understood the problems better than said boss.

    What could he do? The Spaniard was on a permanent siesta, he would only be rumbled from slumbers when it all went tits up.

    So, the problems were known, expdcted, not the magnitude. A few unhappy customers is fine. They cam be fobbed off and ignored. Just like with the whole problem.

  11. Anonymous Coward
    Anonymous Coward

    So by my reckoning, the IT system pays for itself within 5 years, not counting any benefit that it's presumably cheaper/easier to make product changes/developments (without the added disadvantage of having to give the game away to Lloyds what you're up to). I suspect the reason for the rush to migrate was in part due to Lloyds effectively holding TSB hostage with a “pay what we say” hosting.

    An extra 30,000 customers left, out of 4.6m customers. I wonder how many joined in the same time frame.

    I guess my summary is, yes it was an embarrassing fuckup, but largely goes to show that most customers broadly don't care. I wonder how many were actually impacted - I use TSB (and a number of others, for the reasons demonstrated by all banks' inability to give full 100% availability, for obvious reasons to anyone in IT) and have to say the biggest impact was not being able to access online bank successfully for a couple of days. Cards worked, payments went in and out, I really didn’t notice much of a difference.

    Let’s not forget, this was all rooted in the government begging Lloyds to rescue HBOS, then not doing enough to stop the EU forcing them to sell off TSB as a punishment.

    1. devTrail

      Let’s not forget, this was all rooted in the government begging Lloyds to rescue HBOS, then not doing enough to stop the EU forcing them to sell off TSB as a punishment.

      The EU asking to bail out the bankers!? I see a new stream of insults and lies coming out in preparation for Brexit. At this point I do hope that the talks fail quickly and bluntly and Britons get the h... out of the EU ASAP.

      1. Anonymous Coward
        Anonymous Coward

        No, the EU required Lloyds to sell off TSB, because, with the addition of HBOS, it would then have had too large a share of the UK banking market in one company.

        1. Anonymous Coward
          Anonymous Coward

          Why did you have to bring Brexit into this?

          1. YetAnotherLocksmith

            Haha. Well, funnily enough, if you think TSB was a cockup, we have Brexit in 50 days or so. That's going to be like a TSB event for every single company in the UK, all at the same time.

            Yesterday they announced the Queen will be evacuated. It's going to be a hell of a war, right?

        2. devTrail

          No, the EU required Lloyds to sell off TSB, because, with the addition of HBOS, it would then have had too large a share of the UK banking market in one company.

          Right, I misunderstood your comment, but only in part, I still disagree with the idea of involving and scapegoating the EU in this story. First of all, the policy of following the maket rules was theavily influenced by Thatcher Britain and now you are complaining about rules set up with a big contribution from your people. Second, you notice one case when the EU applied the rules, but you don't notice the continuous stream of mergers and spin-offs decided by the private businesses that don't make any sense for customers, shareholders and employess, but provide a lot of fees, commissions and incentives to private bankers and managers. Even without the EU eventually something of the kind woul have happened, it's your country that started the big wave of privatizations.

          1. Anonymous Coward
            Anonymous Coward

            "No, the EU required Lloyds to sell off TSB, because, with the addition of HBOS, it would then have had too large a share of the UK banking market in one company. "

            To try to avoid further confusion, I am the AC who wrote the above comment and I am a different AC from the one who initially described the TSB sell-off as "punishment".

            I was just trying to clarify that the sell-off wasn't punishment, but merely simple competition/anti-monopoly legislation requirements (and it doesn't really matter whether it was the EU or the UK who initiated it).

            I am surprised if LloydsTSB (as it then was) didn't see the likelihood of that coming and should have refused to proceed with the shotgun wedding to HBOS, but given the drop in service when Lloyds borged the original TSB ("What do you mean, I now have to fill in a paper deposit form, when I used to be able to simply just hand over my Speedbank card (or pay in at the ATM itself)?!"), I find it hard to have all that much sympathy for them.

            1. Anonymous Coward
              Anonymous Coward

              "I am surprised if LloydsTSB (as it then was) didn't see the likelihood of that coming and should have refused to proceed with the shotgun wedding to HBOS"

              So I'm the original AC, and I'm not really blaming the EU, Lloyds were given assurances around the merger rules. But what they didn't appreciate was the level of toxic debt saddled with HBOS, meaning the government needed to take a 40% stake in the company - this constituted state aid which meant they needed to sell off TSB to comply with the EU rules.

              It was a bit of a clusterfcuk all round that saved one bank from destruction, but had the collateral damage of almost sinking another.

  12. adnim Silver badge
    Meh

    I presume..

    The shareholders care.

    Hopefully the customers have not lost anything of value.

    meh

  13. DJV Silver badge

    "left the bank with an expected payout of £1.7m"

    And that's one of the problems right there...

  14. herman Silver badge

    Well, since 80,000 customers left, I would expect the system to be a damn sight faster.

  15. John Brown (no body) Silver badge

    forgone income of £33.5m

    "forgone income of £33.5m, which was mostly due to waived fees and charges as a result of the disruption."

    That implies that they'd have that income if they'd not screwed up. But since they screwed up, it was their fault that customers incurred those fees and charges in the first place. This isn't "foregone income", it's non-existent income.

  16. steviebuk Silver badge

    The only good thing...

    ...were their adverts when owned by Lloyds. Now they have nothing apart from this massive stain that they'll never remove and we'll all remember. Their ex CEO killed them.

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