TSB will receive £240m from the Lloyds Banking Group to improve its profits by £200m in aggregate over the next four years.
The group, which accepted the Office of Fair Trading’s principal recommendation, has reached an agreement with Her Majesty’s Treasury (HM Treasury) yesterday.
Under the agreement, the group will transfer the economic benefit of a portfolio of residential mortgages of approximately £4bn together with the associated capital, as well as provide business and IT services to TSB.
In addition, the group will also provide TSB with an additional £40m to enable future customer acquisition and develop its branch network.
The group, which created two separate banks called TSB and Lloyds Bank earlier this week, said that TSB will launch across 631 branches in England, Wales and Scotland with about 4.6 million customers across the UK, and will bring a credible, new competitor to the market.
The group, in a statement, said “it is determined to play its part in delivering a stronger banking industry to better serve customers, support the UK economic recovery and help Britain prosper.”
The OFT, as part of its review, has also studied the impact of the Royal Bank of Scotland Group’s sale of 316 branches.
George Osborne, the British Chancellor of Exchequer, said: “I welcome the strengthening of TSB as a challenger bank which, together with RBS who are proceeding with their plans to introduce a credible player to the market, will increase competition and choice for British businesses and customers.”
TSB is the trading name of Lloyds TSB Scotland. It is likely to be listed as an independent bank in 2014.