Supermarket giant Tesco said today that its banking arm was set to become a "significant" part of its business as it finalised plans to launch mortgages and current accounts.
The supermarket has for the past two years made clear its ambition to become a full service banking operation, last year relaunching its personal finance operation as Tesco Bank to match its aims.
Tesco was quick to pounce amid the financial crisis, establishing its banking arm as a savings brand to capitalise on rock-bottom consumer confidence in major banks.
Today, the supermarket said it anticipated launching mortgages in the first half of 2011, followed by current accounts in the second half of 2011/2012 financial year.
The supermarket shrugged off speculation over the weekend that its plans were being hindered by regulatory burdens and said the process "moving along well".
Tesco said it plans to launch new insurance products in the coming months, following its tie-up with Belgo-Dutch insurance group Fortis. It will also launch a fixed-rate savings bond later this month.
The group is currently developing its own banking network in place of legacy systems inherited from its previous partnership with Royal Bank of Scotland.
A Tesco spokesman said: "It is critical that we design products which are consistent with our brand: namely, products that are simple, transparent and reward customer loyalty.
"We plan to submit our proposals to the FSA next month - there has been no change to the FSA process and we expect permission to launch mortgages to be granted within six months of submitting our request.
"We're making good progress in the development of other new product launches, including current accounts. These will be submitted to the FSA in keeping with their existing processes."
Tesco Bank is already stealing a march on its rivals, with trading profits up 12.2% to £129 million in the 26 weeks to August 28.
The bank reported revenues of £474 million, in a period which saw customer accounts grow by 200,000 to 6.5 million.
Tesco Bank offers around 28 different financial products, ranging from car and home insurance to loans and savings accounts.
The group recently launched a best-buy credit card as it stepped up its assault, offering 0% interest on purchases for 13 months - the longest period available at the time.
Tesco is also offering highly competitive personal loan rates, according to Darren Cook at financial comparison group Moneyfacts.
He said both Tesco and Sainsbury's have been dominating recent best-buy tables for loans.
"Tesco is coming up with some decent deals when the cost of financing from banks is being squeezed," he said.
Historically, Tesco has not always competed well against banking peers, but this has changed since it bought out joint venture partner Royal Bank of Scotland in 2008, said Mr Cook.
"They've got a foothold in the market now and are giving good value, which is good news for consumers."
Tesco is able to tap into customer loyalty and its impressive brand recognition in the UK to help drive personal finance business.
Products can be sold in-store, as well as over the phone and internet.
The banking operation launched in 1997 as a partnership with RBS, before Tesco took full control two years ago, paying £950 million for the remaining 50% stake.
It has more than 500,000 savings accounts with balances of around £4.2 billion.
However, the group has a long way to go before matching the likes of Lloyds Banking Group - which has around 22 million retail accounts and more than £1 billion in assets.Reuse content