Tesco has set out plans to launch a full retail bank, offering current accounts and bank branches in store. 

Tesco has paid £950m to buy the Royal Bank of Scotland’s 50% stake in Tesco Personal Finance on Monday.

It will allow Tesco to widen its financial services offer from the current range of insurance, savings accounts and credit cards, and there are plans to eventually open bank branches in Tesco’s 200 Extra stores.

Andrew Higginson, the current finance and strategy director, has been appointed chief executive of retailing services, assuming a new board position that will encompass Tesco Personal Finance, Tesco.com and Tesco Telecom. He has a target of increasing profits of the retailing services arm to £1bn, from its current level of £384m.

CEO Sir Terry Leahy said: “Services are bigger and faster-growing markets than food,” he said. “As consumers look to make every pound work harder it is a good time for Tesco to expand its presence.”

Higginson said Tesco was well placed to compete with high street banks and said “it would start by developing branches of Tesco’s bank in Extra stores. “We have a terrific brand and a really good knowledge of our customers and those are things we can exploit when it comes to building the bank to a bigger presence than it is today. We’ve got a couple of hundred Extras and it would seem sensible to start with those,” said Higginson.