Tesco Bank, the financial services arm of retailer Tesco, has confirmed the sale of its mortgage portfolio to Lloyds Banking Group for a cash consideration of around £3.8 billion (€4.16 billion).
The sale follows the May 2019 decision by Tesco to stop new mortgage lending and "explore [its] options" regarding the sale of its mortgage book, according to Gerry Mallon, Tesco Bank chief executive.
Tesco Bank has more than 23,000 mortgage customers, and the group's mortgage portfolio generated directly attributable pre-tax profits of £9.1 million in the 2018/19 financial year, it said.
'Reduce Costs'
Tesco said that the sale will enable its Tesco Bank arm to 'reduce operating and funding costs', with proceeds from the sale being used for 're-investment into [its] customer offer, ongoing transformation of the business and re-balancing of retail and wholesale funding sources given the reduction in overall lending'.
The residential mortgage portfolio and arrangements for the ongoing administration will transfer to Halifax, which is part of Bank of Scotland, a wholly-owned subsidiary of Lloyds Banking Group.
'Align Our Resources'
"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," said Mallon. "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."
Mallon addd that Tesco is "confident" that Lloyds Banking Group will continue to provide its customers with an "excellent customer experience".
Lloyds Statement
In a statement, Lloyds Banking Group said that the acquired portfolio will 'generate good returns to the Group in excess of current organic market opportunities, while delivering open mortgage book growth within the Group’s low risk strategy and providing additional flexibility in participation choices in the mortgage market'.
The beneficial ownership of the portfolio is expected to transfer at the end of September 2019, with transfer of legal title anticipated by the end of March 2020.
© 2019 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: The European Supermarket Magazine.
