TESCO’S new chief executive yesterday set the retail giant on course for a showdown with Britain’s banks, as he made growing his financial services unit one of his top priorities.
Philip Clarke, who replaced Sir Terry Leahy at the helm of Britain’s top supermarket last month, said Tesco’s bank would become a “big part” of its future business.
Presenting the group’s annual results yesterday, he said he wanted Tesco to provide “the kind of bank that we all used to love.”
The move will cause anxiety among traditional banking rivals, given the scale of Tesco’s customer base.
The retailer was unwilling last night to divulge the kind of market share it is hoping to achieve, but analysts expect it to have a major impact given that around 20m people go through its UK stores each week.
Tesco is expected to launch into the UK mortgage market in the summer, once it gains approval from the Financial Services Authority.
The retailer recently concluded pilot schemes at six of its UK stores for its banking arm, the results of which are currently being picked over by executives.
Tesco’s further expansion into banking could include the automation and connection of its banking offer with its existing retail systems. One option for the retailer could be for it to integrate its customer loyalty clubcard, used by many millions of customers. The supermarket is likely to emphasise customer service.
The retailer touted encouraging signs of growth in its banking arm yesterday, including a 5.6 per cent year-on-year profit rise.
It also said it had upped its core Tier 1 capital ratio to 15.9 per cent, a position that puts it at a distinct advantage to big banks currently scrambling to improve their capital buffers to meet new regulations.
However, the grocer could face stiff competition from other new entrants to Britain’s banking sector, following the Independent Commission on Banking’s recommendations and the divestment plans of Lloyds and RBS.
Several small banks, including Lord Levene’s NBNK, Richard Branson’s Virgin Money and Metro Bank are also entering the battle for retail customers.
Head of equities at Hargreaves Lansdown Richard Hunter said: “Clearly there’s a long road ahead, but they’re certainly throwing some capital at the situation.”