AIRLINK 81.10 Increased By ▲ 2.55 (3.25%)
BOP 4.82 Increased By ▲ 0.05 (1.05%)
CNERGY 4.09 Decreased By ▼ -0.07 (-1.68%)
DFML 37.98 Decreased By ▼ -1.31 (-3.33%)
DGKC 93.00 Decreased By ▼ -2.65 (-2.77%)
FCCL 23.84 Decreased By ▼ -0.32 (-1.32%)
FFBL 32.00 Decreased By ▼ -0.77 (-2.35%)
FFL 9.24 Decreased By ▼ -0.13 (-1.39%)
GGL 10.06 Decreased By ▼ -0.09 (-0.89%)
HASCOL 6.65 Increased By ▲ 0.11 (1.68%)
HBL 113.00 Increased By ▲ 3.50 (3.2%)
HUBC 145.70 Increased By ▲ 0.69 (0.48%)
HUMNL 10.54 Decreased By ▼ -0.19 (-1.77%)
KEL 4.62 Decreased By ▼ -0.11 (-2.33%)
KOSM 4.12 Decreased By ▼ -0.14 (-3.29%)
MLCF 38.25 Decreased By ▼ -1.15 (-2.92%)
OGDC 131.70 Increased By ▲ 2.45 (1.9%)
PAEL 24.89 Decreased By ▼ -0.98 (-3.79%)
PIBTL 6.25 Decreased By ▼ -0.09 (-1.42%)
PPL 120.00 Decreased By ▼ -2.70 (-2.2%)
PRL 23.90 Decreased By ▼ -0.45 (-1.85%)
PTC 12.10 Decreased By ▼ -0.89 (-6.85%)
SEARL 59.95 Decreased By ▼ -1.23 (-2.01%)
SNGP 65.50 Increased By ▲ 0.30 (0.46%)
SSGC 10.15 Increased By ▲ 0.26 (2.63%)
TELE 7.85 Decreased By ▼ -0.01 (-0.13%)
TPLP 9.87 Increased By ▲ 0.02 (0.2%)
TRG 64.45 Decreased By ▼ -0.05 (-0.08%)
UNITY 26.90 Decreased By ▼ -0.09 (-0.33%)
WTL 1.33 Increased By ▲ 0.01 (0.76%)
BR100 8,052 Increased By 75.9 (0.95%)
BR30 25,581 Decreased By -21.4 (-0.08%)
KSE100 76,707 Increased By 498.6 (0.65%)
KSE30 24,698 Increased By 260.2 (1.06%)
Business & Finance

UK's Tesco to sell $4.7bn mortgage book as competition bites

LONDON: Britain's biggest retailer Tesco will stop mortgage lending at its banking business because of tough market
Published May 21, 2019

LONDON: Britain's biggest retailer Tesco will stop mortgage lending at its banking business because of tough market conditions, it said on Tuesday, as rival lender Nationwide Building Society reported a drop in profit margins.

Tesco Bank, which serves more than 23,000 mortgage customers with total balances of 3.7 billion pounds ($4.7 billion), said it would stop new lending and seek to sell its existing portfolio of home loans.

"In recent years, challenging market conditions have limited profitable growth opportunities," said Tesco Bank Chief Executive Gerry Mallon.

Bellwether mortgage lender Nationwide on Tuesday said that its net interest margin - a measure of underlying profitability - fell to 1.22% in the year to April 4, from 1.31% for the previous 12-month period, though it was able to stabilise income.

The statements from the two lenders show how competition and a subdued economy are squeezing margins in Britain's home loans sector, a key profit source for banks.

Nationwide said it expects margins to remain under pressure this year.

"As you can imagine, pricing remains extremely competitive. We have seen some stability in new business pricing over recent months, but overall trends in margins you will continue to see," said senior Nationwide executive Chris Rhodes.

Uncertainty over Britain's exit from the European Union has prevented interest rate increases that could have boosted loan margins, while a glut of new banks and rules pushing established players to lend more have increased the supply of mortgages.

Europe's biggest bank HSBC, in particular, has renewed its focus on home loans in Britain after the introduction of ring-fencing rules to insulate savers' money from riskier trading activity forced it to carve out its British retail bank.

The newly separated domestic bank had little choice but to boost mortgage lending to make money, intensifying competition in the market.

Credit ratings agency Fitch said it expects other lenders to follow suit and quit home lending as a result of the influx of lending from newly ring-fenced banks.

Fitch said it had also seen a rise in riskier mortgage lending at some banks, with higher loan-to-value ratios that could be exposed to any economic downturn or disruptive Brexit.

However, the agency said these higher-risk mortgages remained a low proportion of lenders' overall loan books.

Tesco bank said its priority would be to sell the entire mortgage portfolio for an acceptable price as it exits the business in favour of other unspecified opportunities.

Copyright Reuters, 2019

Comments

Comments are closed.