Tesco buys RBS out of finance venture for $1.9 bln
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Britain's biggest retailer, announced a major push into banking on Monday with a 950 million pound ($1.9 billion) deal to buy out Royal Bank of Scotland from their finance joint venture.
Tesco said it planned to extend its financial services business to a full-service retail bank. This and other service businesses like telecoms would be capable over time of delivering 1 billion pounds of profits a year, up from just under 400 million now.
It said Benny Higgins, a former executive at RBS and HBOS, will run Tesco Personal Finance (TPF).
Andrew Higginson, the retailer's finance and strategy director, will become chief executive of retailing services and will step down as finance director once a successor is in place.
The deal is a further sign of Tesco's determination to branch out of its core UK grocery market, which it dominates with a market share of about 30 percent. The group is already a major force in DVDs, books and clothes, and has also expanded internationally, recently opening stores in the United States.
The deal is also a boost for RBS's faltering plans to boost its balance sheet by selling assets. RBS said it expects to make a 500 million profit on the deal.
TPF celebrated its 10th anniversary last year, when it made a profit of 206 million pounds and had 5.2 million customers for products including insurance, credit cards, loans and savings.