Reuters Summit-UK's Tesco sees some growth in personal finance

Tesco Personal Finance was launched as a joint venture with the Royal Bank of Scotland a decade ago, when supermarkets moved into banking and insurance offering no-nonsense, cheap, off-the-shelf deals for customers.

Though supermarket credit cards and general insurance products have grown strongly - Tesco alone has over 5 million customer accounts - retailers account for only a small fraction of the UK's multibillion-pound market.

"We weren't planning to become the world's biggest bank," Finance Director Andrew Higginson told the Reuters Consumer and Retail Summit in London.

"What we saw was an opportunity to try and bring well-priced, simple products to market, and we've been partially successful."

Tesco Personal Finance's profit under new IFRS accounting standards was flat last year, largely due to bad-debt provisions. Higginson said it would see "a little growth" in 2006, adding the shaky unsecured lending market, which has hit major banks including Barclays , was improving. "It is (better), but the loans market is becoming a bit irrational, so we're not pushing too hard," Higginson said. "You often find people (being lured) in with an attractive rate, then two or three years down the track they're paying through the nose. It's not the way we do things."

Tesco is also the one of the first supermarkets to test the waters on residential mortgages, which account for the bulk of UK personal borrowing.

"There have beena few trials, but we've never made much of a fist at mortgages," Higginson said, adding that could be an area of growth. He excluded a move into current accounts.