Tesco Bank, the
financial services unit of the world’s fourth biggest retailer, has
posted a 13% rise in trading profit to £250m ($385m) for the 52
weeks to the end of February 2010 as it prepares to ramp up its
efforts to challenge the country’s traditional Big Four retail
banks: Lloyds, Royal Bank of Scotland, HSBC and Barclays.
Tesco said it grew customer
accounts by more than 400,000, to total more than 6.2m clients,
adding that it achieved double-digit customer growth across a range
of products, including 27% growth in personal loans. It also
expanded its ATM network to over 2,800 during 2009.
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The bank’s profits contributed a
7.3% share of the group’s total profits, but revenue dipped 9.4% to
£860m while bad debts rose 32% to £177m.
The scale of the retailer’s
ambitions were highlighted in March, when it disclosed that it was
looking to achieve a 10% market share of the UK’s retail banking
sector.
A spokesperson for Tesco said the
bank was “talking about the very long-term” and would not confirm a
specific figure.
“We plan to use the relationship we
have with our loyal customers to ultimately create a substantial
business in a number of areas,” the spokesperson told RBI
(see RBI 629).
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By GlobalDataThe company confirmed that it would
launch new savings products and mortgages by the end of 2010, with
current accounts to follow in the second half of 2011 subject to
regulatory approval.
But the bank still has a relatively
small product offering in comparison to the UK bank’s major
players, restricting itself to offering personal loans, car, life
and pet insurance and selling foreign exchange.
“Overall, Tesco
Bank has delivered a good performance in a challenging retail
banking market,” the bank said in a statement.
“Bad-debt levels rose during the
year but have now stabilised – and throughout have remained below
industry averages. We have absorbed additional costs as we begin
the process of moving the business onto its own infrastructure and
build the team as we prepare the business for faster growth.”
The bank said its agreement with
Dutch insurer Fortis in September 2009 to develop its insurance
business and deal with technology provider Fiserv were “progressing
well”, with the new systems planned to be used for the business by
the end of 2010.
The bank also outlined plans to
open new outlets for banking and insurance in the north of England
and Scotland in mid-2010.
The Tesco Group recorded an overall pre-tax profit of £3.4bn in
the year ended 27 February and said it would be stepping up its
expansion plans in Asia.
