Tesco ‘considering sale’ of Tesco Bank, according to reports
Tesco is considering selling Tesco Bank, according to Sky News which has reported that the supermarket giant has started a review process for its banking arm.
The review is at a very early stage, according to insiders, and may not lead to a formal sale process. A partial sale or joint venture may also be considered.
Tesco is potentially bringing in Goldman Sachs to advise on Tesco Bank’s future, according to the report. .
Sky News confirmed that there is no suggestion there will be job-losses or any form of wind down.
Analysts suggested that the move would make sense and would allow Tesco to cut costs and to concentrate on its core business.
IG Group’s Chris Beauchamp said Tesco “needs to focus relentlessly on costs.”
“With so much of its business under pressure due to higher prices and weaker spending, it’s time Tesco ditched its banking arm, one of the ‘luxuries’ of easier times’, if only to free up cash to help maintain its market share,” Beauchamp said.
Professor Joshua Bamfield at Centre of Retail Research agreed, telling City A.M “the bank is a diversion from its main business while the proceeds of a Tesco Bank sale could be poured into making its grocery shopping more efficient and lower cost.”
Tesco Bank was launched in 1997. It has more than five million customers across its banking and insurance business.
Bamfied commented that while Tesco Bank is “undoubtedly successful, getting into retail banking has been pretty tough for many of the big players in shopping such as M&S (which closed down its current accounts) and Sainsbury’s (which tried to sell its bank in 2021).”
Last month, Jacqui Ferguson, formerly of Hewlett Packard Enterprise Services, was appointed its interim chair after Sir John Kingman, the former Treasury mandarin, resigned to become chair of Barclays’s UK ring-fenced bank. Kingman had been chair since 2019.
In 2019 it divested its UK residential mortgage portfolio to Lloyds in a deal worth £3.7bn. In 2021 the bank stopped offering current accounts in order to concentrate on savings accounts and credit cards.
In the first half of 2023, Tesco Bank recorded an adjusted operating profit of £67m, down 6.9 per cent on the year before. Revenue was up 24 per cent year on year.
It forecasts operating profit of between £120m and £160m for the full year.
Last month Tesco purchased the brand and intellectual property of Paperchase after the embattled stationary company collapsed into administration.
Tesco declined to comment. Goldman Sachs has been contacted for comment.