Investec, an investment research firm observed that the TSB Banking Group PLC (LON:TSB) outperformed its peers in the United Kingdom since its initial public offering (IPO) in June. TSB Banking’s offering price was 260 pence per ordinary share.

TSB Banking Group logo

TSB Banking Group PLC (LON:TSB) is currently trading at 280.25 pence per ordinary share, slightly down around 4:29 P.M. BST.

Investors widely endorsed management’s vision

In a recent note to investors, Investec emphasized that TSB Banking Group PLC (LON:TSB) enjoyed a fantastic IPO, materially outperforming all other banks in the United Kingdom since its debut.

The investment research firm said, “investors have—rightfully in our view—broadly endorsed management’s vision of a gradual transition to 10%+ RoEs by 2019.”

Investec perceived TSB Banking Group PLC (LON:TSB) as a defensive with strong capital, strong liquidity and a relatively predictable earnings outlook for now.

According to investment research firm, the bank is currently insulated from broader open-ended conduct risks and/or inappropriate credit exposures. In addition, Investec considers the management team of TSB Banking Group PLC (LON:TSB) as its key strength.

TSB Banking Group’s near-term outlook appears challenging

Investec observed that the near-term outlook of TSB Banking Group PLC (LON:TSB) appears challenging and expects its franchise business to incur a loss in the second-half of 2014e and 2014e.

On a twelve-month view, the investment research firm perceives a modest absolute downside and better value elsewhere. Investec has a Hold rating for the shares of TSB Banking Group PLC (LON:TSB) and a price target of 294 pence per ordinary share.

The investment research firm explained that the bank’s pre-determined cost base e with the proposed further material escalation in the second-half of 2014e, 2015e, and 2017e create a “growth imperative, which can’t be delivered soon enough.

Investec emphasized that it was outlook on the mortgage market in the United Kingdom is positive. It is also enthusiastic with the ability of TSB Banking Group PLC (LON:PLC) to start a balance sheet growth next year when its intermediary platform comes on stream. However, Investec believes that TSB’s income is falling, and costs are rising until then.

In addition, Investec agreed that the performance of the bank in the first-half of this year was in-line as described by the management. The investment research firm observed that the balance sheet decline across all products was faster than expected, which was offset by a small beat on costs.

Investec noted that TSB’s current account acquisition was strong, but the conversion of the performance into profitable relationships is less clear-cut. The investment management firm said it remained cautious on the personal unsecured space.

The investment research firm advised switching to Lloyds Banking Group PLC (LON:LLOY). It has a Buy rating for the stock.