Tesco profits fall as bank absorbs FCA fine

Tesco profits fall as bank absorbs FCA fine

Tesco Personal Finance has reported a drop in profits in the first half of this year, as it absorbed the cost of a £16.4m fine imposed by the Financial Conduct Authority (FCA).

In its interim report for the six months to August, the bank reported a 24.8 per cent drop in its pre-tax profit to £83m, compared with £110.4m a year earlier.

Tesco partially attributed this to an increase in operating expenses, including an additional payment protection insurance (PPI) charge of £7m and the £16.4m fine received for its failings during cyber attacks in November 2016.

The bank has also seen a drop in its fee and commission income of 6.5 per cent to £170.8m, as it reported a reduction in ATM transactions with customers preferring contactless and card payments. 

Tesco also attributed this diminished figure to "continued pressure" on insurance retention rates in what it said was a competitive environment.

Tesco’s mortgage balances however, grew by 16.8 per cent in the six months to August reaching £3.5bn, with the bank stating customer deposits, at £10.1bn, remained its primary source of funding.

In its interim report, Tesco reported its balance sheet remained strong and well positioned for future growth.

In the regulator's assessment of the cyber attacks, which saw fraudsters net £2.26m, the FCA found the bank had failed to exercise due skill, care and diligence in protecting account holders.

The attacks, which occurred over a period of 48 hours, revealed holes in Tesco's debit card design and financial crime controls as well as the effectiveness of its financial operations team to fend off the attacks.