Tesco Moves to take Outright Ownership of Banking Operation

30 July 2008

CHESHUNT, UK: Supermarket giant Tesco has sealed a £950 million ($1.9bn; €1.2bn) buyout of its Tesco Personal Finance joint venture with the Royal Bank Scotland, and is mooted to be planning a "full-service banking offering including in-store branches”.

The retailer has announced that it will be adding current accounts to TPF's existing personal loan, insurance and credit card services, and is aiming to extend these financial services to established markets like Hungary, South Korea and Thailand over the next two years.

Finance and strategy director Andrew Higginson will become chief executive of retailing services – which consists of TPF, Tesco.com and Tesco Telecoms – and a new finance director will be recruited in the coming months. 

Higginson said the company will avoid offering “labyrinthine” banking products, and instead seek to provide easy-to-understand current accounts, with the possibility of even moving into mortgages. 

He added: “We start from a position where we can be much more transparent on our pricing, but also it is about giving customers products they want at a fair price”. 

Estimates by Citigroup analysts suggest Tesco paid nearly 13 times the level of earnings for RBS's share in TPF – above the industry average of around seven times the value of earnings – but also said the company was a low-risk investment as it is not currently linked with mortgages.

Data sourced from Financial Times; additional content by WARC staff