Slip at supermarket group
Profits plunge at Tesco Bank on slowing deposits and PPI
The bank sold its mortgage business
Tesco Bank’s half-year profits from continuing operations plunged 71.2% to £16.8m from £58.4m last year as it grappled with higher PPI payouts and a fall in customer deposits.
The supermarket group’s financial services division, based in Edinburgh, said deposits from customer deposits – its main source of funding – fell 5.4% to £9.9 billion from £10.5bn last year.
This reduction came as the group began to reduce its savings balances in response to the planned sale of its mortgage business which was offloaded last month to Halifax, a subsidiary of Lloyds Banking Group, for £3.7bn.
Tesco also paid out an additional £45m in compensation for mis-sold payment protection insurance, against £7m last time.
It said there had been a reduction in ATM income as a result of the downward trend in ATM transactions being seen across the market as customers move towards contactless and other card payments;
The company also suffered impairment charges related to credit card regulatory changes.
In a statement the company said: “In recent years, challenging market conditions have limited profitable growth opportunities.
“The group’s focus is on how it can best serve Tesco customers and align its resources effectively to their needs while ensuring that its offering remains sustainable in the long-term.
“To that end, the Group made the strategic decision to focus on serving a broader range of customers in more specific areas, resulting in the move away from the Group’s Mortgage offering.”