Bank of Scotland and Halifax owner HBOS is losing the operations director of its massive retail banking business, Shaun Doherty, to former main board director Benny Higgins at Tesco Personal Finance, The Herald has learned.

Bank of Scotland and Halifax owner HBOS is losing the operations director of its massive retail banking business, Shaun Doherty, to former main board director Benny Higgins at Tesco Personal Finance, The Herald has learned.

Julie McClelland, head of banking operations in HBOS's retail division and former chief operating officer of its internet and telephone bank Intelligent Finance, has also been offered a job by Tesco Personal Finance. It is believed that HBOS may make a last-ditch attempt to keep her, but it is far from clear whether this will succeed.

Doherty has responsibility for information technology as well as operations in HBOS's retail banking business, and sits on this division's board. He played a key part in building Standard Life's highly-regarded customer service systems before Higgins brought him to HBOS in 2006.

News of Higgins' recruitment of Doherty and, barring any eleventh-hour retention, McClelland, comes nearly a year after the announcement of his own unexpected exit from HBOS. This departure was triggered by a restructuring engineered by chief executive Andy Hornby - which left Higgins out in the cold.

Higgins was head of HBOS's retail banking division for little more than a year and, although denied by Hornby last August, sources attributed his departure to a "personality clash" with the chief executive. The history between Higgins and Hornby would seem likely to make Higgins relish even more his recruitment swoop on the HBOS retail banking oper- ations and IT team.

On the corporate front, it underlines the seriousness of Tesco's ambitions to build a "full-service retail bank" on the back of its £950m acquisition of supermarket banking partner Royal Bank of Scotland's 50% stake in the pair's Tesco Personal Finance joint venture. This deal was announced on Monday, and is expected to be completed in the fourth quarter.

Tesco's ambitions have already been highlighted by its recruitment of Higgins as chief executive of Tesco Personal Finance. Iain Clink, who headed Tesco Personal Finance between 1999 and 2004 and was until recently head of cards and direct finance at Royal Bank, is coming back to the supermarket banking business as finance director.

Contracts have been signed which will see Royal Bank continue to provide services to Tesco Personal Finance's general and life insurance, cash machine, banking, and Tesco Compare operations for between two and seven years, with the duration varying according to product line. These services include call centres, account establishment and management, card issuance, back-office processing, and collections and recoveries.

Doherty and McClelland, unless HBOS persuades her to stay, will be instrumental in building Edinburgh-based Tesco Personal Finance's own banking and general insurance platforms to bring much of this support work in-house when these contracts end.

Such systems and operations development work will be crucial to the supermarket group being able to achieve its ambitions to expand Tesco Personal Finance dramatically. It plans to take significant market share in current accounts and possibly add mortgages to an existing product range which spans motor, home, pet and travel insurance, savings accounts, credit cards, and personal loans, and is also eyeing international expansion.

Doherty will be director of IT and operations at Tesco Personal Finance. McClelland has been offered the post of head of IT and operations development.

One financial sector source yesterday highlighted Doherty's achievements in improving HBOS's telephone banking service since he came to the bank. Given he was brought into HBOS by Higgins, it would seem likely that he would once again have been the first choice of his former colleague to head IT and operations at Tesco Personal Finance.

When Doherty left Standard Life, its then head of life and pensions, Trevor Matthews, paid tribute to what Doherty had achieved. Matthews was quoted at the time as saying: "He (Doherty) leaves the customer service operation in a very good shape. It is one of the best in the country, if not the world."

Tesco Personal Finance made pre-tax profits of £206m last year and is expected to make more than £240m in 2008. It has been built from a standing start in 1997 and is a stand-out success story in the supermarket banking arena, with 5.5 million customers.

Higgins revealed on Monday that he had been working with the supermarket group on the purchase of the Royal stake in Tesco Personal Finance since "around the turn of the year".

He headed Royal's retail banking business before joining HBOS in 2006. He sat on Tesco Personal Finance's board between 1998 and 2006. Before Royal, he worked at Standard Life and would have seen Doherty's achievements at that organisation.

Tesco Personal Finance, in its entirety, will account for significantly more than half of Tesco's near-£400m of annual profits from services, as opposed to its dominant retailing business.

On Monday, Tesco director Andrew Higginson highlighted ambitions to raise this to £1bn in "the next few years", and envisaged banking would still account for more than half of this larger number.

Higginson will head Tesco's "retailing services" business, which also takes in telecoms and "internet/home shopping".