Tesco reports 11.6% drop in profits as bank baseline remains stable

Tesco Bank profits remain stable at £89m while Tesco Group has revealed today that it experienced an 11.6 per cent decline in profits before tax in the first half of 2012

Bad debts reduced by 35 per cent based on an improvement in the rate of customer default but it says external economic pressure has led to a decline in profitability.

The financial services arm of the UK supermarket giant launched a range of two, three and five-year fixed rate mortgages in August, as well as two-year trackers available up to 80 per cent LTV.

The results explain that while the bank’s standby facilities, credit lines are all in place and mortgage offers have been made, funds have yet to be drawn down.

Lending at the bank increased by £0.3bn between February 25 and August 25, from £7.4bn to £7.7bn.

For the wider Tesco group over the first half of the year, sales rose 1.4 per cent to £36bn but statutory profit before tax down fell 11.6 per cent to £1.7bn. Underlying profit before tax fell 8.5 per cent to £1.8bn, according to the latest interim report.

Tesco chief executive Philip Clarke says: “We have made some important strategic changes which have fundamentally altered our approach to capital allocation.

“First, significantly reducing space growth in the UK and focusing on improving the performance of our existing stores – and second, investing in online to enable Tesco to take a leadership role in the digital revolution: playing our part in shaping the future of retailing.”