Ed intanto Tesco...(UK GDO) si fà la banca..
LONDON (Dow Jones)--Tesco PLC's (TSCO.LN) push into retail banking has been given a fillip by the financial services crisis in the U.K., and will give the retailer a boost at a time when more-traditional revenue streams are under pressure, analysts say.
Tesco, the U.K.'s biggest retailer by revenue, says it has been opening about 1,000 savings accounts a day in recent weeks after a promotional push in December. It says the demand is "a result of customers turning away from traditional banks to hold their money."
In July, the company bought Royal Bank of Scotland Group PLC (RBS) out of its financial services joint venture for GBP950 million, saying it wanted to grow the business and could even eventually create a full-service retail bank, offering current accounts and mortgages.
That was before the U.K. government had to nationalize two banks, guarantee most customer savings at all banks, and inject capital into RBS and Lloyds Banking Group PLC (LYG) in return for stakes of about 70% and 43%, respectively. This has left the reputation of local banks in tatters and encouraged wary consumers to look at the financial offerings of Tesco and rival J Sainsbury PLC (SBRY.LN) as alternatives.
"Sainsbury, along with Tesco, are both brands which consumers generally tend to trust, probably more so than the banking brands at the moment," Charles Stanley analyst Sam Hart said, adding that they are well-positioned to build their banking customer base.
U.K. supermarkets are still performing well and planning to add new stores as well as thousands of new staff this year as food sales continue to rise. Nearly every other private sector is shedding jobs due to sliding sales as the economy weakens.
But Tesco was the weakest performer among its supermarket peers over the recent Christmas trading period, mainly because it sells more non-food lines, such as clothes, DVDs and electrical goods, than William Morrison Supermarkets PLC (MRW.LN) and Sainsbury.
Tesco Personal Finance Ltd., which provides savings accounts, personal loans, credit cards and car and travel insurance, could help bolster the slowing growth in revenue along with its burgeoning international supermarket operations, analysts say.
Tesco declined to comment on its most recent expectations or prospects for the banking unit, but Charles Stanley's Hart says it seems to be doing "extremely well at the moment." Hart has an accumulate rating on Tesco and Sainsbury.
Tesco has made its intentions clear, offering the best savings rate on the market for a period in December as it tried to lure more deposits, and giving Finance Director Andrew Higginson a more hands-on role by making him chief executive of Retailing Services.
As well as Tesco Personal Finance, the company's Retailing Services division consists of its Internet-shopping operation and telecommunications, which is still run on a joint-venture basis with O2.
Higginson has predicted that offering a wider range of traditional banking services such as current accounts and mortgages could push the unit's revenue to GBP1 billion a year in the foreseeable future, from about GBP400 million now. Tesco's total revenue - sales excluding value-added tax - was GBP47.30 billion in fiscal 2008, up 11% from a year earlier.
Christopher Hogbin, a senior analyst at Sanford C. Bernstein, expects Tesco Personal Finance to book an annual pretax profit of around GBP230 million this year, up 13% from GBP204 million a year earlier.
Tesco said earlier this month that its savings account boost means Tesco Personal Finance is now self-funding, putting it in a "strong position" to pursue a strategy of expanding its products and customer base. Tesco Personal Finance was founded in 1997.
Sainsbury, meanwhile, still runs its financial services operations as a joint venture with Lloyds Banking - the company resulting from the recent merger of Lloyds TSB and HBOS. Sainsbury's Bank was originally set up as a joint venture between Sainsbury and HBOS in 1997.
But it is lagging far behind Tesco - Sainsbury's Bank booked a profit after tax of GBP2 million in the 28 weeks to Oct. 4, compared with a GBP4 million loss a year earlier, with half the proceeds going to HBOS. The turnaround was due to a reduction in bad debts, tight cost control, continued tight loan criteria and diversity in income, including a concentration on commission-based products, it said.
In November, Sainsbury said the bank should yield a "small profit" in fiscal 2009. A company spokesman declined to give any update.
While they may not yet have the scale to challenge the likes of RBS, Lloyds and Barclays PLC (BCS) in the U.K. retail banking market, Tesco and Sainsbury seem set to continue benefitting from the growing consumer distrust of the mainstream banks.
They have a "very consistent flow of (customer) traffic into their stores that remains pretty robust through the economic cycle. Certainly, in the case of Tesco, you have a brand that consumers believe represents value and Tesco working for them," Bernstein's Hogbin said.
