Tesco cuts NatWest tie to link with Royal Bank
NatWest said it had refused to help Tesco expand further into retail banking and insurance, a decision which is the clearest indication so far of the extent of the threat from the supermarket chains to the big English high street banks.
Tesco's large store network could soon be competing head-on with NatWest's branches, but Royal Bank has a far smaller overlap with Tesco.
It has only a 3-4 per cent banking market share in England and Wales.
Shortly afterwards, Lord MacLaurin, chairman of Tesco, resigned as a non-executive director on the NatWest board because of the potential conflict of interest, and David Reid, the deputy chairman of Tesco, quit his non-executive directorship of the insurance group Legal & General. Tesco will sell life insurance through its new joint venture with Royal Bank, which owns the telephone insurance company Direct Line and also has a strategic partnership with Scottish Widows, a competitor of L&G.
Derek Wanless, NatWest chief executive, said Tesco's plans conflicted with NatWest's own retail banking strategy.
It emerged that NatWest may make a claim against Tesco for the cost of pulling out of the five-year contract to manage the pioneering Tesco Clubcard, which pays interest on credit balances and has a low charge to borrowers. The Clubcard sparked the war among supermarkets to enter financial services.
NatWest said the intention had been to work with Tesco over the five years of the contract to develop new card-based products, but "what they came to us with was akin to full retail banking and that did not fit with us".
NatWest added: "We will have to sit down with Tesco to thrash it out. There is a contract and they have given indications today that it will be broken."
Tesco said it offered NatWest the opportunity to continue as its banking partner but the offer was declined. NatWest refused to rule out a claim against Tesco for the cost of winding down the Clubcard service, which employs a separate processing unit and a number of managers at the banking group to service the 9 million Clubcard customers. The problem for NatWest was that Tesco decided to go well beyond plastic card products by developing a wide range of services including a pilot project for an in-store bank later this year. The first big launch will be a Tesco credit card. The joint venture may apply for a banking licence.
World news in pictures
Far-right French historian, 78-year-old Dominique Venner, commits suicide in Notre Dame in protest against gay marriage
Plenty of Fish dating site founder pulls 'Intimate Encounters' option to ward off sleazy men
Oklahoma tornado latest: Obama pledges support for 'as long as it takes' to rebuild the suburb of Moore
Video emerges of Pope Francis reportedly performing an exorcism
- 1 Gay couple beaten in park urge MPs to moderate language on gay marriage
- 2 Swedes set up 'ultimate Viking movie'
- 3 After woman sells virginity for $780,000, here are the results of our prostitution survey
- 4 Far-right French historian, 78-year-old Dominique Venner, commits suicide in Notre Dame in protest against gay marriage
- 5 'It was just like the movie Twister': Man survives Oklahoma tornado by taking refuge in horse stall
BMF is the UK’s biggest and best loved outdoor fitness classes
Find out what The Independent's resident travel expert has to say about one of the most beautiful small cities in the world
Win anything from gadgets to five-star holidays on our competitions and offers page.
iJobs Money & Business
£850 - £1000 per day: Orgtel: Programme Change Manager - Banking - London - £8...
£180 - £230 per day: Orgtel: Operations Analyst - Leading Bank in the City of ...
£500 per day: Orgtel: A top tier banking client urgently requires Finance Busi...
£425 - £550 per day: Orgtel: Senior Finance Project Manager - £550 - Bristol -...