Tesco to Enter Retail Banking Following RBS Takeover

Tesco has purchased RBS 50% share in Tesco Personal Finance (TPF) in a deal worth £9 50 million. Now, they are ready to compete with High Street banks.

TPF was launched in 1997 as a joint venture between Tesco and RBS. They sell general insurance, credit cards, personal loans, savings products, and have an online insurance comparison website. They have over 5 million customers in the UK, Ireland, Hungary and Poland.

According to Sir Fred Goodwin, RBS group chief executive, over the last decade the joint venture has been running successfully and he wishes Tesco do well with the solo venture.

Tesco's chief executive Sir Terry Leahy, said financial services are big and fast growing markets than food. Today consumers are cutting back so it's a good time for Tesco to expand their wings.

RBS will continue to deal with the financial products sold by TPF. Tesco believes that £1 billion profit every year can be delivered through personal finance and over 50% more than the current level of just under £400 million per year.

Benny Higgins, former HBOS and RBS retail chief, has been appointed to direct the new TPF arm.

Approximately 200 people who work for RBS on TPF will relocate to Tesco but the company’s head office will continue in Edinburgh.

RBS just raised £12 billion through a rights issue but is currently struggling to sell its insurance arm which includes Churchill, Direct Line, Privilege, UKI and NIG.

The declaration from Tesco is a matter of concern for High Street banks that are due to proclaim falling profits over the next few weeks due to more write-downs against investment in US mortgages.

The announcement from Tesco is certain to be a concern for High Street banks who are due to announce falling profits over the next few weeks due to further write-downs against investment in US mortgages.

News Categories