PROFITS at Tesco Bank more than doubled in the first half of the year, boosted by a £30 million payment as it settled a dispute with a “former business partner”.
The Edinburgh-based bank, launched in 1997 as a joint venture between the supermarket and Royal Bank of Scotland, refused to give more details on the payment, citing the confidential nature of the settlement.
Trading profits at the bank, headed by chief executive Benny Higgins, jumped 114 per cent to £94 million, but revenues fell 1.5 per cent to £514m as it held back a marketing push while it switched customer accounts over to new computer systems.
The group said: “We are pleased to report that the final transition – of our 2.8 million credit card accounts – went smoothly, with all of our six million customer accounts now successfully transferred.”
Excluding one-off items, pre-tax profits would have been “broadly stable” at £89m. Tesco bought out RBS’s stake in 2008 for £950m and now fully owns the bank.
Along with credit cards, the bank offers insurance and savings accounts, and moved into the mortgage market in August. It plans to introduce current accounts once switching is made easier under changes being brought in next year.
Profits were also lifted by the fact that the bank took a £57m provision last year to cover possible claims over the alleged mis-selling of payment protection insurance (PPI) policies. It has now set aside £78m for PPI claims, having raised its provision by £30m towards the end of the first half.
Bad debts fell by 35 per cent as fewer customers defaulted on borrowing, which saw the amount set aside to cover bad and doubtful debts drop to £43m, from £66m a year ago.