Tesco Personal Finance (Tesco Bank) has confirmed the sale of its mortgage portfolio to Lloyds Banking Group for a cash consideration of c. £3.8 billion. Tesco Bank has over 23,000 mortgage customers.

The mortgage portfolio has a lending balance of c.£3.7 billion and generated pre-tax profits of £9.1m in the 2018/19 financial year. As part of the sale the entire residential mortgage portfolio and arrangements for the ongoing administration will transfer to Halifax, a Division of Bank of Scotland plc, a wholly owned subsidiary of Lloyds Banking Group. The customer accounts will transfer to Halifax once necessary transitional arrangements have been delivered. It is anticipated that beneficial ownership will transfer at the end of September 2019 with legal title occurring by the end of March 2020.

The sale is in line with Tesco Bank’s strategy of focusing on a reduced number of products and services that serve the broad range of Tesco customers, and will reduce operating and funding costs. The sale proceeds will be used for re-investment into our customer offer, ongoing transformation of the business and re-balancing of retail and wholesale funding sources given the reduction in overall lending.

Commenting on the sale, Gerry Mallon, Tesco Bank Chief Executive, said “In May we announced our decision to stop new mortgage lending while we explored our options to sell the mortgage book. Our focus is on how we best serve Tesco customers and align our resources effectively to their needs while ensuring that our offer remains sustainable in the long term. As a result, we made the decision to move away from our mortgage offering. Our priority throughout has been to complete a commercially acceptable transaction with a purchaser who will continue to serve our customers well.”

“After a thorough process, we are pleased to confirm that we have agreed the sale of our mortgage book to Lloyds Banking Group, operating under the Halifax brand. We are confident that they will continue to provide our customers with an excellent customer experience.”

Commenting on the sale  Mark Gordon, Director of Mortgages atcomparethemarket.com, said “The news today that Tesco has sold its 23,000-customer mortgage arm to Lloyds Banking Group may spark some concern for the affected customers and what this may mean for their mortgage. Under the terms of the deal, customers will be transferred to Halifax and should see no immediate change to their current rate or mortgage term. Even so, it may be worth some of those customers considering refinancing options as the savings could be significant. By shopping around, customers are more likely to find a competitive deal elsewhere – especially as mortgage rates are now very good value. Equally, for those on a standard variable rate, this is an opportunity to switch to a fixed deal which are often far more competitively priced.”