UPDATE 3 — Edinburgh-based Tesco Bank announced on Tuesday the sale of its mortgage portfolio to Lloyds Banking Group for £3.8 billion in cash.

“The mortgage portfolio has a lending balance of c. £3.7bn and generated pre-tax profits of £9.1m in the 2018/19 financial year,” said Tesco Bank.

“As part of the sale the entire residential mortgage portfolio and arrangements for the ongoing administration will transfer to Halifax, a Division of Bank of Scotland plc, a wholly owned subsidiary of Lloyds Banking Group.

“The customer accounts will transfer to Halifax once necessary transitional arrangements have been delivered.

“It is anticipated that beneficial ownership will transfer at the end of September 2019 with legal title occurring by the end of March 2020.”

Tesco Bank has more than 23,000 mortgage customers.

Tesco Bank said the sale is in line with its strategy of focusing on a reduced number of products and services that serve Tesco customers, and it will reduce operating and funding costs.

Tesco Bank CEO Gerry Mallon said: “In May we announced our decision to stop new mortgage lending while we explored our options to sell the mortgage book. 

“Our focus is on how we best serve Tesco customers and align our resources effectively to their needs while ensuring that our offer remains sustainable in the long term.

“As a result, we made the decision to move away from our mortgage offering.

“Our priority throughout has been to complete a commercially acceptable transaction with a purchaser who will continue to serve our customers well.

“After a thorough process, we are pleased to confirm that we have agreed the sale of our mortgage book to Lloyds Banking Group, operating under the Halifax brand.

“We are confident that they will continue to provide our customers with an excellent customer experience.”