By contrast with the year endured by its parent group – the supermarket chain Tesco has had a troubled year – Tesco Bank has grounds for feeling pretty chipper. At group level, for the 12 months to the end of February, group level profits fell by 6% to £3.31bn ($5.6bn), writes Douglas Blakey
Sales were flat, market share fell and it reported some whopping write-downs: £540m in China in addition to taking an £801 charge due to troubles mainly in Central Europe.
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Tesco Bank reports separately and its relative good news seems to have escaped the attention of the analysts.
Not one of the many analyst notes released to coincide with the release of Tesco’s figures makes mention of the banking unit’s earnings.
Although Tesco Bank revenue fell in fiscal 2013 by 1.7% to £1.0bn, trading profit rose by £3m to £194m.
Provisions fell by 25% to £61m while total advances and loans to customers soared by 20% to £3.7bn.
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By GlobalDataOn an analyst call, Tesco’s embattled CEO Philip Clarke was asked what we should expect in the year ahead and what should we be looking for?
Said Clarke: "what am I looking forward to most, I think is the launch of our current account from Tesco Bank for the UK in just a few months time will be very
exciting, very exciting.
"The E-Wallet follows later this year, which will be transformational, leaning
straight into the connected consumer who is now shopping in store, on mobile or
online."
The wallet will be based on Tesco’s smartphone app and will work with all debit and credit cards.
Clarke is patently banking on the long awaited current account launch providing some much needed positive news for Tesco.
And now we hear of his enthusiasm for the launch of Tesco’s digital wallet.
One stat among the multitude of figures released by Tesco is enough to explain Clarke’s enthusiasm for digital: Tesco customers who choose to use its digital products or services spend 13% more.
Slowly but surely, Tesco is teasing the market with snippets about what a Tesco current account will look like.
Clarke’s analyst presentation said that the account would reward customers every day and would be characterised as simple, transparent and convenient while strengthening loyalty and engagement with Tesco.
Tesco has given itself a sporting chance of making a go its current account roll out by assembling a talented team under Benny Higgins, unarguably one of the outstanding retail bankers of his generation.
News that a digital wallet is to follow will only serve to focus more attention on the retailer’s banking unit in the second half of the year.
Among the challenger brands, Tesco is not going to have it all its own way; as EPI goes to press, some highly impressive images come to hand of Virgin Money’s newly opened Money Lounge in central London.
Meantime, Marks and Spencer is about to expand its current account product range with what looks like, at first glance, a very competitive offering.
Looking further ahead, next year will see the launch of two new direct banks in the UK, subject to regulatory approval.
Quite how they will differentiate itself in the market is a discussion for another day.
