Tesco Bank to raise cash in City

Tesco Bank is proposing to raise money on wholesale money markets to finance mortgage lending. The move will contrast with other new banks such as Metro and Virgin that intend to use only retail funds deposited by savers.

The supermarket group, led by Sir Terry Leahy, is expanding into banking after paying £950m to Royal Bank of Scotland to take control of the finance joint venture they started. Fixed-rate savings bonds have just been launched, with mortgages on offer from next summer, and a current account in 2012. Tesco Bank also offers insurance, loans and credit cards. The bank has 500,000 customers and around £4.5bn on deposit. There is a surplus on its savings book, but mortgage lending is expected to mop that up quickly and force the bank to borrow in the City.