Tesco makes banking move to capitalise on credit crisis
Grocery giant plans to offer mortgages and current accounts
Wednesday 01 October 2008
Tesco has said the banking crisis has helped pave the way for it to launch mortgages and current accounts, as it posted underlying pre-tax profits up by 10.3 per cent to £1.45bn for the six months to 23 August.
Andrew Higginson, Tesco's chiefexecutive of retailing services, said: "The opportunities in banking are bigger now than when we first announced the deal [with Royal Bank of Scotland]. Customers are looking for a brand that they can trust." In July, the grocery giant said it would acquire the remaining 50 per cent of Tesco Personal Finance (TPF) from RBS for just under £1bn.
Mr Higginson said Tesco would launch current accounts, and revealed it will also enter the mortgage market in "due course" – a move it had previously baulked at "because we could not see making money at the prices offered in the market".
Tesco has been piloting a banking services desk at its supermarket inSilverburn shopping centre, Glasgow, which some have dubbed a mini-TPF store, but Mr Higginson declined to comment on a potential roll out.
Over the 26-week period, TPF delivered profits up 34 per cent to £71m, of which Tesco's share was £35.5m.
In its core UK grocery business, Tesco delivered like-for-like sales, excluding petrol, up 4 per cent for the quarter to 23 August. Sir Terry Leahy, Tesco's chief executive, said the grocer had seen strong sales from the launch of nearly 400 discounter brands last month.
However, he said: "It is no secret we lost a few customers to retailers with a strong price image," such as discounters Aldi and Lidl and Tesco's more traditional rivals Asda and Morrisons.
Greg Lawless, an analyst at Blue Oar, said, "This time last year they were not at the races [in the UK] and werelosing market share to more price-oriented players. Since April, they have reset the offer and it is gradually moving forward." Tesco held its UK trading margin at 5.9 per cent.
Tesco said it is on track to deliver savings of £450m this financial year, despite its UK energy and utility bills soaring by £70m – which is higher than the start-up costs of its US business.
Mr Leahy said that robust growth across the grocer's food business had more than offset a slowdown in sales of its organic ranges and its Tesco's Finest premium lines, which were "not [growing] that well", as customers seek out bargains or trade down to value lines. Food price inflation had peaked and would come down in the second half, Mr Leahy said.
The grocer's rate of growth in non-food sales halved to 4 per cent in the first half, compared with the same period last year, andUK clothing sales were "flat". Tesco's international operation, which has 1,722 stores outside the UK, delivered sales up 26.8 per cent.
Tesco's shares rose 17.7p to 387.6p.In the US, Tesco's 90-store Fresh & Easy convenience store chain racked up trading losses of £60m over the half year, on sales of £76m. Mr Leahy said: "We are encouraged by the early performance of Fresh & Easy."
- 1 This 'woman calls police to order pizza' story isn't going where you're expecting
- 2 Marijuana use by teenagers does not result in a lower IQ or worse exam results, study finds
- 3 Watch what happened when food critics were unknowingly served McDonald's
- 4 Jimmy Carr's controversial Oscar Pistorius joke goes too far at the Q Awards
- 5 NHS staff banned from drinking tea or coffee on the job because it looks like they're not working hard enough
Renee Zellweger on plastic surgery: 'I'm living a more fulfilling life and I'm thrilled that perhaps it shows'
Kim Jong-un 'purge': Six North Korea officials missing for weeks 'may have been executed'
Diwali: What is the festival of lights – and how is it celebrated around the world?
Nathan Cirillo: Final pictures emerge of soldier moments before he was shot dead by Ottowa gunman
Jimmy Carr's controversial Oscar Pistorius joke goes too far at the Q Awards
Of course, teenage girls need role models – but not like beauty vlogger Zoella
Cameron is warned 'no possibility' of UK reducing immigration and that bid to bring in quota on migrant workers would be illegal
Support for EU membership 'at highest level since 1991' with most Brits wanting to stay 'in'
Thousands with degenerative conditions classified as 'fit to work in future' – despite no possibility of improvement
Residents should throw a street party and mix with immigrant neighbours, councils told
Russell Brand threatened with arrest after filming outside Fox News headquarters
iJobs Money & Business
£350 - £360 per day: Ashdown Group: SQL Developer with T-SQL, Watford, Hertfor...
120-150k: Accountancy Action: We are looking for an experienced CFO from a min...
£24000 - £28000 per annum + bonus & benefits: Ashdown Group: IT Business Syste...
£18000 - £23000 per annum + Commission: SThree: The SThree group is a world le...