Tesco Personal Finance has sold its mortgage portfolio to Lloyds Banking Group for a cash consideration of c.€4.2bn (£3.8bn). The mortgage portfolio has a lending balance of c.€4.1bn (£3.7bn) and generated directly attributable pre-tax profits of €10m (£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, a wholly-owned subsidiary of Lloyds Banking Group. 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, the 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 excellent customer experience."