Tesco Bank has sold its mortgage business to Lloyds Banking Group for £3.8bn, in a move which will see its 23,000 customers switched to a new provider.
The retail giant ceased all lending on its mortgages in May, as it announced it was trying to hive off its ledger book. Tesco, which said the portfolio made pre-tax profits of £9.1m last year, has lent its mortgage customers £3.7bn.
However, it said that after overheads and other costs the business’ contribution to Tesco’s overall profits was “immaterial”.
Customers will be transferred from Tesco Bank to Halifax, a division of Bank of Scotland, which is in turn a subsidiary of Lloyds. Ownership will transfer at the end of September with legal title occurring by the end of March 2020, it said.
The supermarket hopes that it can buck a tricky retail market by simplifying its business and selling off non-core arms such as mortgages.
Tesco Bank chief executive Gerry Mallon said: “In May we announced our decision to stop new mortgage lending while we explored our options to sell the mortgage book.
“Our focus is on how we best serve Tesco customers and align our resources effectively to their needs while ensuring that our offer remains sustainable in the long term.
“As a result, we made the decision to move away from our mortgage offering. Our priority throughout has been to complete a commercially acceptable transaction with a purchaser who will continue to serve our customers well.
“After a thorough process, we are pleased to confirm that we have agreed the sale of our mortgage book to Lloyds Banking Group, operating under the Halifax brand. We are confident that they will continue to provide our customers with an excellent customer experience.”
Lloyds said the new portfolio would generate “good returns” to the company, “in excess of current organic market opportunities”.
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