Tesco has reportedly started to sound out potential buyers for its banking unit, which is run by Belfast native Gerry Mallon.
The UK retailing giant was first said in February to be considering a sale of the banking unit. Bloomberg reported on Tuesday that the group’s advisers at Goldman Sachs have begun to contact potential bidders, adding that the process is at an early stage.
Mr Mallon quit as chief executive of Ulster Bank in the summer of 2018, after two years with the lender, to head up Tesco Bank. Ulster Bank’s UK parent, NatWest, subsequently decided in early 2021 to wind down the Irish bank.
Tesco Bank offers a range of credit cards, personal loans and insurance products to around 5 million customers, according to its website. The bank’s loan book grew 10 per cent to £7.4 billion (€8.5 billion) in the 12 months to the end of August, the end of the first half of its financial year, Tesco said earlier this month.
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The bank’s total income rose 16.5 per cent to £702 million on the first six months of the previous financial year, while operating profits gained 25 per cent to £65 million, fuelled by its credit cards business. Tesco Bank also paid a special dividend of £250m to the group during the reporting period, “reflecting the strength of the Bank’s balance sheet and capital ratios”, according the statement at the time.
The potential sale adds to the list of mid-sized lenders in the UK in flux. The Co-Operative Bank is also evaluating a possible sale while Metro Bank recently secured a rescue package this month.
Co-operative Bank agreed in August to buy the £480 million mortgage portfolio of Sainsbury Bank, which is led by another one-time Ulster Bank CEO, Jim Brown. Sainsbury Bank ceased mortgage sales in 2019.
A sale of Tesco Bank could free up some capital for Tesco, which is the largest grocer in the UK. It has been grappling with rising costs and competition from discounters such as Germany’s Lidl and Aldi.
– Additional reporting, Bloomberg
