Tesco considers current account offering

Leaflets at Tesco checkout

The Royal Bank of Scotland is to jack-in its 50% stake in Tesco Personal Finance, as the supermarket unveils plans to expand its savings range and potentially offer current accounts for the
first time.

The deal will see Tesco buy-out RBS for £950 million, leaving the bank £500 million in profit after costs. The two firms established the insurance, credit card, mortgage and savings provider back in 1997 as a joint venture, and have since them accumulated 5.5 million customers and 25 different products.

Sir Terry Leahy, chief executive of Tesco, says the supermarket plans to expand the brand to make the most of current turbulent conditions: “Services are bigger and faster-growing markets than food. As consumers look to make every pound work harder, it is a good time for Tesco to expand its presence.

Tesco Personal Finance reported profits of £206 million before tax this year, but the firm believes it could increase its revenue to £1 billion a year. To do this, it is looking to expand its range of savings products and potentially even launch into the already competitive current account market.

Despite waving goodbye to the venture, RBS will continue to offer commercial services to the brand after the deal completes.

Sir Fred Goodwin, group chief executive of RBS, says: "At this stage of its maturity it is appropriate for Tesco Personal Finance to move to single ownership for the next stage of its growth and we wish it well with its future plans."