Tesco launch of mortgages held up by red tape and IT glitches

Tesco Bank was due to offer its first mortgages this autumn, but its entry is not now expected until early 2012 as it ensures its systems work properly and it completes regulatory hurdles that have taken longer than initially expected.

A spokesman insisted the launch of its mortgage product was making “good progress”, although new chief executive Philip Clarke had insisted in April that the bank would be able to offer mortgages by the autumn “at the latest”.

The bank confirmed it was still awaiting clearance from the watchdog, the Financial Services Authority (FSA), to sell mortgages. The bank had applied to the FSA for clearance as long ago as last November. Tesco Bank chief executive Benny Higgins told The Scotsman then that he expected the process to take up to six months.

But Tesco is still also testing its systems to make sure there are no technical problems. In June, angry customers of the bank deluged the firm’s Glasgow-based call centre after being locked out of their accounts due to ongoing “hiccups” in the bank’s systems.

The problem for the bank followed a migration of 850,000 savings and loans accounts from systems at Royal Bank of Scotland, which had been a joint venture partner in the business.

The chairman of Tesco Bank, Andrew Higginson, resigned from the board of the retailer in August. Higginson, who had been group finance and strategy director at Tesco for 11 years, had led the retailer’s purchase of RBS’s 50 per cent stake in Tesco Personal Finance for £950 million in 2008.

In a note to investors, Matthew Truman, an analyst at JP Morgan Cazenove, said the bank’s roll-out was expected to be “slightly slower to ensure systems integration is complete before new product launches. We now expect early next year.”

He added: “Mr Clarke will likely hold off launching a push on credit cards and new products such as mortgages until he is entirely comfortable that the Tesco brand will not be tarnished by any future problems with the systems.”

A Tesco Bank spokesman said: “We are making good progress with our mortgage launch plans. We’re confident that our initial entry into the mortgage market will see us offer a great value product with the convenience and simplicity that Tesco customers expect. We are in the advanced stages of the regulatory process and will be in position to provide details of the launch soon.”

Meanwhile, Tesco is rumoured to be plotting a significant price offensive as it looks to stem recent losses in grocery market share amid strong competition from discounters Lidl and Aldi.

Asda has upped the stakes in the supermarket pricing war this year with a scheme that sees it guarantee to be 10 per cent cheaper than its rivals while Ocado and Waitrose have matched their prices with Tesco’s.