By Ian Walker 
 

LONDON--TSB Banking Group PLC (TSB.LN) Friday reported a 29% rise in pretax profit over the past three months, boosted by lower impairment and lower costs. The firm said it is on track to provide mortgages through brokers from the first quarter of next year.

TSB, which was spun-off by Lloyds Banking Group PLC (LYG) in June, said it had picked up nearly one in 10 new customer accounts in the period, "well ahead of our long term target."

"The strong current account performance is one of the factors that has enabled us to grow our customer deposits by 0.5 billion pounds ($0.8 billion) to GBP24.2 billion," Chief Executive Paul Hester said.

Shares at 0745 GMT up 3 pence, or 1.16%, at 262 pence.

TSB made a pretax profit for the quarter ended Sept. 30 of GBP33.1 million, up from GBP25.7 million for the earlier quarter ended June 30. On a management, or adjusted basis, pretax profit rose 32% to GBP41.6 million.

Net interest income for the quarter slipped to GBP199.3 million, from GBP201.6 million, and operating expenses fell 7.1% to GBP167.9 million. It booked an impairment charge of GBP23 million, down from GBP23.8 million in the earlier quarter.

TSB said it remains strongly capitalized with a pro forma common equity tier 1 capital ratio of 18.8%, compared with 18.2% at June 30.

"While it remains a five year journey, TSB continues to build on the strong start to life as an independent listed business. Our performance has been in line with expectations and reinforces our credentials as Britain's Challenger Bank," TSB said.

TSB is launching a new intermediary channel enabling brokers to sell its mortgages. The bank, which already has a mortgage loan portfolio that was assigned to it by Lloyds, said it expects to begin testing the new distribution platform in December ready to receive the first mortgage applications through the channel in January.

Net lending to TSB's franchise customers fell GBP0.3 billion to GBP19.1 billion in the third quarter, given the absence of a mortgage intermediary distribution channel, the bank said. Loans and advances to customers fell 2.1%, or GBP477 million compared with June 2014.

It expects falls in both mortgages and loans to continue for the rest of the year before the intermediary channel is operational in 2015.

Lloyds still holds 50% of TSB. It was ordered by the European Union in 2009 to sell at least 600 branches as a condition of state aid. The FTSE100-listed financial-services firm, which is still 24.9% owned by the U.K. Government, must divest its remaining shares in TSB by the end of next year.

-Write to Ian Walker at ian.walker@wsj.com

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