SIMON BAIN

Tesco has said its trading recovery means it has no plans to sell off major assets such as Scotland-based Tesco Bank, which contributed almost a third of group profit in the first half of the year.

The bank which employs most of its 4000 workforce in Edinburgh and Glasgow lifted its pre-tax profit by 25per cent to £100m in the six months to August 31, while underlying pre-tax profit was down 8.7 per cent at £106.8m.

Tesco meanwhile saw core profits plunge 55per cent to £354m. But the retail giant’s recovery in sales volumes and transactions however has lifted the pressure on its balance sheet, 11 months after bank staff had to be reassured by chief executive Benny Higgins over rumours of a sell-off or flotation.

Former RBS executive Mr Higgins meanwhile can even claim some credit for the signs of turnround, after being appointed to the additional role of head of group strategy at the start of 2015.

Group chief executive Dave Lewis said yesterday that following the

£3.7billion sale of its South Korean business, further reduction of its £16.5bn debt would come from better cash generation from its retained businesses.

Mr Lewis, installed as chief executive last September during a year which saw Tesco post a £6.4billion loss, got the thumbs-up from the market after unveiling rises of 1.5 and 1.4 per cent in sales volumes and transactions respectively, with the shares climbing two per cent.

Tesco Bank lifted its total accounts from 7.2m a year ago to 7.6m, a rise of 6.2 per cent.

It said the half-year had seen growth of four per cent across credit cards, personal loans, mortgages, and personal current and savings accounts. “This growth has been delivered within an extremely competitive trading environment and total customer accounts now stand at over 5.6m.”

The bank did not strip out figures for the long-awaited current account launched in June last year, though industry figures published in the summer showed it

attracted fewer than 4,500 new customers through the current account switching service – in the full year Halifax won over 150,000 and Santander over 186,000 new customers.

In August in a submission to an imminent report by the Competition and Markets Authority the bank urged greater transparency from the big banks over their offerings, and Mr Higgins said it was “about time that the industry took concrete steps to restore faith in the sector”.

Last month the bank dropped its £5 a month charge on the account for customers paying in less than £750 a month.

Mr Lewis commented: “Tesco Bank has continued to innovate, including highlighting foregone interest in current account statements. We’ve also developed a traffic light guide to current accounts, helping customers understand why not all current accounts are equal and free banking isn’t free.”

Total underlying income was down 0.3 per cent at £392.7m , depressed by the cut in profitability on credit cards following the capping of ‘interchange’ or commission rates.

The bank warned that the biggest impact would be felt next year when the commission on Mastercard transactions drops from 0.8 per cent to 0.2 or 0.3 per cent. Meanwhile some 2.8million customers have seen their Clubcard rewards cut to pay for the missing profit.

Customer lending rose by since 7.4per cent to £8.3bn, underpinned by mortgage growth, while customer deposits fell from £6.9bn to £6.6bn of £6.6bn and continue to be the main source of the bank’s funding.