Tesco Bank’s Chief Executive Comments on New Mortgages
By Laura Elliott.
Tesco Bank’s Chief Executive Benny Higgins has outlined the key areas involved in the launch of the company’s long-anticipated move into mortgages. Despite recent reports of delays, commenting in The Scotsman newspaper Mr. Higgins said that the supermarket-owned bank is set to launch its mortgage product in a “couple of months”. He went on to say that the Edinburgh-based bank’s mortgages will be primarily funded by deposits, but that it still intends to access the wholesale markets.
Last year, Tesco Bank raised £1.5 billion in 14 months following the introduction of a fixed-rate savings product, and a further £185 million by the issuing of a corporate bond which targeted retail investors. Mr. Higgins said that “It has changed the balance sheet. It has given us quite substantial funding which is important as we head towards mortgages.”
Tesco Bank’s savings book has 5.9 million customers, and reportedly has grown its share of the credit card market by more than half, from 8% three years ago when it bought out its partner, the Royal Bank of Scotland. “Frankly, if somebody had said to me in December 2008 we expect you to get from 8% of all credit card transactions in the UK to 13% in three years, I would have thought of that as a pretty big stretch,” Mr. Higgins said.
He also commented on the fact that supermarket giant Tesco has invested over £400m in the development of Tesco Bank, turning it into a “business of scale”. The increase has seen the number of jobs at the bank rise from 200, to 3,000 in Edinburgh, Glasgow and Newcastle. Currently, around 2,250 of the bank’s employees are based in Scotland.
The bank is now developing new methods of marketing financial products to Tesco’s 16 million club card holders. The information taken from the club cards has also given the bank a good indication of how they could reduce motor insurance for some customers by up to 20%. The new “rewards for loyalty” are expected to be extended to the bank’s future mortgage customers as well.
“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. 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,” said Higgins.
Despite the series of delays which have plagued the bank, Higgins insisted that he was “proud” of the progress they had made, and is confident that the bank will be able to compete with the “big five” high street lenders. In 2010 the supermarket said that 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.
Mr. Higgins admitted that 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.
He said: “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.”
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