James Daley

By James Daley

I wrote a few weeks ago about my disappointment with TSB's first nine months in business. As a challenger bank with over 4 million customers, it has a unique opportunity to lead change in the banking sector - and as I observed back then, there's still very little to tell it apart from most others in its sector, other than a few aspirational marketing messages.

Today, the bank finally confirmed its intention float on the stockmarket this summer, and promised to offer private investors one free share for every 20 they buy. It will be enough to turn many investors heads - especially in the wake of the Royal Mail's flotation last year, which proved something of a giveaway for those who were smart enough to get on board at the beginning.

Whether TSB makes money for shareholders in the short-run will of course come down to how it's priced, and what markets are doing generally at the time. However, once the initial post-float hype has died down, will it thrive or falter?

Bags of potential

I, for one, won't be rushing out to buy shares in the bank. While it has bags of potential, the early signs are that achieving this may prove much trickier than it had first thought. In terms of customer happiness, TSB is third from bottom in Fairer Finance's bank account tables, ahead of only Clydesdale Bank and Royal Bank of Scotland. It has a mountain to climb in terms of bringing its existing customer base on board after a clumsy demerger from Lloyds last year.

In the meantime, it has been a bit too quick out of the blocks in trying to paint itself as the saviour of retail banking. If it follows the right strategy, its time to make such bold claims will come. But success in financial services is about so much more than slick advertising campaigns. Firms that over-promise and under-deliver are likely to be punished harder than those who are a bit more realistic about what is achievable.

TSB would be given some grace by its customers if it was more honest about the challenges of turning a branch of Lloyds into a whiter than white savings and loan business that puts its customers first.

I'm also wary that one of the bank's key management team left so early in the process. Mike Regnier, the bank's products and marketing director, jumped ship to join Yorkshire Building Society at the start of the year - a smaller competitor, where presumably the potential rewards are not nearly so great.

Most of the work is still left to do

It's not too late for TSB to turn things around. It is after all very early days. And I like the little videos they've made showing how they make their money - that's a first in the banking sector.

But at this stage in their journey, the money spent on these adverts could have been much more effectively deployed into rewriting terms and conditions, making its website simpler - and putting some distance between itself and Lloyds in real terms, not just in terms of rhetoric. Most of that work is still left to do.

I can definitely see myself being an investor in TSB one day. But I won't be there at the float.