Tesco is taking full control of Tesco Personal Finance, after paying Royal Bank of Scotland £950m for its 50% stake in the division.
The two firms went into business together in the financial services market 11 years ago.
The latest deal is part of Tesco's strategy to increase its share in growing areas including financial services, telecoms and internet/home shopping.
Britain's largest retailer believes such services could deliver £1bn in profits per year, more than double the current levels of just under £400m.
Tesco says it will now "extend its ... business from a collection of popular financial products to a full service retail bank offering more choice to customers."
The firm's chief executive Terry Leahy said: "Services are bigger and faster-growing markets than food.
The disposal of RBS's 50% holding comes at a crucial time for the NatWest owner as it looks to bolster its battered balance sheet.
Tesco Personal Finance was founded in 1997 and now has more than five million customer accounts.
It generated profit before tax of £206m last year, with the figure expected to exceed £240m this year.
The main activities are in general insurance, credit cards and personal loans, personal saving products, online insurance comparison through Tesco Compare and a network of cash machines.
The business will be led by Benny Higgins, who has run the retail banking divisions of both RBS and Halifax Bank of Scotland.
Tesco said the headquarters would remain in Edinburgh, with around 200 staff head office staff also due to transfer to Tesco.
The current closest business model to Tesco Personal Finance is Sainsbury's Bank, which is owned 50-50 by Sainsbury's and the bank HBOS.
Source: http://news.sky.com/skynews/Home/Business/Tesco-Pays-Royal-Bank-Of-Scotland-950m-In-New-Personal-Finance-Deal/Article/200807415058484?f=rss
