BENNY Higgins, the chief executive of Tesco Bank, yesterday outlined key planks of the bank’s strategy as it prepares to launch its long-awaited move into mortgages.
Speaking to The Scotsman, Higgins confirmed that the supermarket-owned bank would bring out its mortgage product in a “couple of months”. Higgins said the Edinburgh-based bank’s mortgages will primarily be funded by deposits, but it would also access the wholesale markets.
Last year the bank raised £1.5 billion in 14 months with the launch of a fixed-rate savings product and £185 million by issuing a corporate bond targeted at retail investors.
Higgins said: “It has changed the balance sheet. It has given us quite substantial funding which is important as we head toward mortgages.”
He added that its savings book has grown 20 per cent in three years, including 12 per cent last year against a wider market that grew only 2 per cent.
Tesco Bank, which has 5.9 million customers, has grown its share of the credit card market by more than half from 8 per cent three years ago when it bought out its joint venture partner, the Royal Bank of Scotland.
“Frankly, if somebody had said to me in December 2008 we expect you to get from 8 per cent of all credit card transactions in the UK to 13 per cent in three years, I would have thought of that as a pretty big stretch,” he said.
He said the bank’s parent company has invested more than £400m in developing the bank into a “business of scale”. This has seen jobs rise from 200 to 3,000 across four sites in Edinburgh, Glasgow and Newcastle. Around 2,250 of the bank’s employees are in Scotland.
Higgins is bullish about the prospects for the bank, which is developing methods of marketing financial products to Tesco’s 16 million club card holders. The information gleaned from club cards has also given the bank indications of how it could reduce motor insurance for some customers by as much as 20 per cent. The bank’s “rewards for loyalty” are expected to be extended to the bank’s mortgage customers.
“Last year we returned £100m worth of club card points into the pockets of Tesco Bank customers.
“It is a way of saying thank you and a way of rewarding their loyalty for using our products,” said Higgins.
He added: “The mortgage product will have all the hallmarks of what we are trying to set out to do running the business, which is transparency and rewards for loyalty.”
Higgins insisted he was “proud” of the progress made by Tesco’s bank operations despite the series of delays in the launch of key products that will finally see the bank compete with the “big five” high street lenders.
In 2010 the supermarket said its bank would launch mortgages in the first half of 2011, followed by current accounts in the second half of the 2011-12 financial year. The latter will not be launched until next year when it will be easier for customers to switch banks.
He admitted the migration last summer of 550,000 savings customers from the RBS platform had not been easy but he added that Tesco Bank staff in Glasgow were “heroic” for dealing with the crisis last June which saw about 6,000 customers unable to access savings accounts.
“When I look at how many customers we have been serving and how well we have been serving them – there are issues, things have not always gone smoothly.
“But I don’t think I can characterise the last three years, in terms of serving customers and serving them well and growing the business, as being anything other than something to be very proud of.
“I don’t say that lightly. I think we have done a very good job in growing the business.”