Tesco delays launch of current accounts

Tesco Bank, which offers insurance, credit cards and savings products, was set to offer a current account this year but the release was put back to allow it to take advantage of new rules making it easier for customers to switch (GETTY IMAGES)

Banking customers hoping to open a current account with Tesco will have to wait until next year after its launch was delayed, it was reported today.

Tesco Bank, which offers insurance, credit cards and savings products, was set to offer a current account this year but the release was put back to allow it to take advantage of new rules making it easier for customers to switch, The Times said.

The Independent Commission on Banking last year recommended that a free current account redirection service is formed to improve the system by which customers can switch bank accounts and is set up by September 2013.

Tesco Bank, which has 6.5 million customers, was launched in 1997 as a joint venture between supermarket giant Tesco and Royal Bank of Scotland. Tesco acquired the remaining 50% RBS stake in 2008 for £950 million and Tesco Bank is now fully owned by Tesco.

Tesco is understood to be planning the launch of its first mortgage product within two months, after the move was also put back, from a start date originally planned last autumn.

A cash Isa product is also planned for this year, but not in time for the end of the tax year in April.

The delays come shortly after the wider Tesco group shocked investors when it reported a "disappointing" Christmas period and warned that profits could be lower than expected.

The company saw billions of pounds wiped from its market value after chief executive Philip Clarke said the grocer had failed to pull in enough customers with its £500 million Big Price Drop campaign.

Competition in the banking sector has been one of the main focal points of regulatory change in the last few years.

The Co-operative Bank in December entered exclusive discussions with Lloyds Banking Group over the sales of 632 branches, being disposed of under European competition rules.

Last November, Virgin Money bought nationalised Northern Rock for £747 million, which boasts 75 branches, one million customers and holds £14 billion of mortgages.

PA