TESCO'S banking operation reported profits of £244 million last year as it cashed in on the flight of consumers from established banking brands during the financial crisis.
Edinburgh-based Tesco Personal Finance (TPF) – which the supermarket chain owns entirely after buying out Royal Bank of Scotland's half share at the end of last year – also promised that it was on track to become a "full service retail bank" in the n
ear future.
The group, which said it plans to offer current accounts within two years, revealed that total accounts and policies rose by 8 per cent in the year to the end of February. Its current services span from credit cards and pet insurance to bureaux de change and savings accounts.
Results for TPF – which is headed by chief executive Benny Higgins – were released yesterday alongside the supermarket giant's annual figures.
A change in the firm's reporting period to match Tesco's means there are no direct figures to compare previous years, although the last published set of accounts to be filed with Companies House, for 2007, showed a profit of just £135m.
Yesterday's results confirmed a near-doubling of savings balances since last autumn's financial crisis – from £2.5 billion in mid-October to more than £4.5bn by the end of February.
During the final ten weeks of the trading year, TPF, which counts six million customers since launch 11 years ago, contributed £163m to Tesco's overall UK sales of £59.4bn.
The company said yesterday: "Tesco Personal Finance delivered a good performance in a challenging financial services market."
It added: "The business is profitable and well-capitalised, which is a strong platform from which to pursue our plans to develop TPF from a successful, popular collection of financial products to a full-service retail bank in the years ahead."
It recently emerged that Tesco plans to open 30 bank branches in its stores by the end of this year, following a successful trial in Glasgow.
The retailer has also drafted in a number of non-executive directors who formerly worked at major financial institutions such as Barclays and Scottish Widows to work at TPF. It plans to beef up the division's headquarters in Edinburgh by more than 200 staff.
Tesco said the expansion of its banking division would go some way towards a total of 11,000 UK jobs being created by the retailer this year, which includes 1,500 jobs north of the Border.
But the division has not been immune to financial sector woe, reporting a rise in the number of customers defaulting on loans and credit card debt.
It said the bad debts increase was only "modest", setting aside £134m in provisions.
The insurance side of TPF still represents the lion's share of the business, accounting for 65 per cent of the underlying profits.
