Tesco Bank, the
financial services arm of the UK’s largest retailer, has posted a
net profit of £44m ($68m) for the 26 weeks to 27 August, down
65.9% from the year ago period.

Tesco Bank’s profit was
hit by a £57m increase in provision for PPI mis-selling; excluding
the extra provisioning resulted in a 21.7% fall in trading profits
year-on-year to £101m.

Tesco also confirmed
that it was to delay until early 2012 the introduction of its first
mortgage and current account products.

Philip Clarke, Group CEO,
Tesco Bank, said:

“We had a bit of a problem
in the summer in migrating from the Royal Bank of Scotland’s
systems to our own. Our savings products weren’t available for a
few hours; not good.

“We’re slowing down in
order to make sure that the next and last migration, which is
credit cards, goes without a hitch.

“Once we’re through that,
and we’ll be through that by the end of our financial year, then we
can start to add new products and new services.”

First half Tesco Bank
highlights included:

  • Customer account numbers grew across the
    product portfolio – savings by 1%, active credit card users by 4%
    and motor insurance by 3%;
  • Balances increased by 3% on credit cards
    and 2% on savings.
  • Year-on-year, ATM transactions also rose
    strongly by 8%, and
  • Tesco credit card retail increased by
    14.2%, ahead of the market.

Profits are down but on an
underlying basis the Bank profits are up over 20%. In a period of
migration, you’re trying to create a new Bank, there’s always ebbs
and flows, underlying strong growth and we expect that to continue,
in the years to come,” added Clarke.