Tesco quick to reassure profit hit won’t impact banking division

Yesterday the company revealed that the first six months of the year saw its saw core profits slump 55 per cent to £354m.

However, the retailer stressed that the figures do not mean it will be compelled to sell-off major assets such as its bank which contributed almost a third of group profit in the first half of the year and employs most of its 4,000-strong workforce in Edinburgh and Glasgow.

Tesco Bank lifted its pre-tax profits by 25 per cent to £100 million in the six months to August 31, while its underlying pre-tax profits were down 8.7 per cent at £106.8m.

But despite Tesco profits taking a battering, accounts did show a recovery in sales volumes and transactions, which has lifted the pressure on its balance sheet.

The news will be welcome north of the border where just 11 months ago Tesco was forced to reassure banking staff over rumours of a sell-off or flotation.

Tesco Bank chief executive Benny Higgins, who was also appointed head of Tesco’s group strategy at the start of the year, has steered the bank to lift its total accounts from 7.2m a year ago to 7.6m, a rise of 6.2 per cent.

Tesco Bank said the half-year had seen growth of four per cent across credit cards, personal loans, mortgages, and personal current and savings accounts, adding: “This growth has been delivered within an extremely competitive trading environment and total customer accounts now stand at over 5.6m.”

The bank did not strip out figures for the long-awaited current account launched in June last year, though industry figures published in the summer showed it attracted fewer than 4,500 new customers through the current account switching service – in the full year Halifax won over 150,000, and Santander 186,000, new customers.

In August, in a submission to an imminent report by the Competition and Markets Authority, the bank urged greater transparency from the big banks over their offerings.

Last month, the bank dropped its £5 per month charge on the account for customers paying in less than £750 a month.

Group chief executive Dave Lewis said: “Tesco Bank has continued to innovate, including highlighting foregone interest in current account statements.

“We have also developed a traffic light guide to current accounts, helping customers understand why not all current accounts are equal and free banking isn’t free.”