(1888PressRelease)
August 19, 2008 - London (Shakespearefinance) – Tesco is the biggest retailer in Britain. It has announced a major push into banking and other service sectors with a 950 million pound deal to buy out Royal Bank of Scotland from their finance joint venture. The UK giant Tesco has planned to set up its own full-service retail bank along with other services like telecoms and Internet and home shopping.
Tesco is the latest sign of retailer's determination to branch out of its core British grocery market. With a market share of over 30 percent it is dominating in its domain, Tesco is a leading force in various segments such as DVDs, books and clothes. It has recently planned to expand its stores in the United States.
With the latest project, it is believed that it will make annual profits of 1 billion pounds in coming few years when compared with the group's total profit before tax of 2.8 billion pounds in the year ending Feb. 23. “It says something of their ambition," said BlueOar Securities analyst Greg Lawless.
The deal is a boost to Royal Bank of Scotland's (RBS) unsteady plans to sell assets to bolster its balance sheet. The RBS expects to make a 500 million pound profit on the sale of its 50 percent stake in Tesco Personal Finance (TPF). Citi analysts said Tesco was already paying 12.7 times earnings for the stake. It is above the UK banking sector average of about 7 times. The TPF was a low-risk business with a focus on savings and car insurance and no exposure to mortgages.
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