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Tesco Bank sees estimated credit losses spike by more than 100%

Tesco Bank has seen estimated credit losses (ECL) on customer loans rise by 102% to £360m, in the year to February, its annual results show.

The group held an ECL provision of £624.6m as at 28 February 2021, which had also grown from £488.4m the year prior.

 

According to the results, the increase in provisions compared to the prior year is primarily due to the deterioration in the macro-economic outlook including the pandemic and Brexit.

 

Gross loans and advances subject to forbearance

Credit Cards UK

£118.8m

Loans

£48m

 

At 28 February 2021, the group had contractual lending commitments of £12.7bn, up from last year’s figure of £11.bn. The results showed an additional ECL provision of £28.3m recognised at 28 February 2021.

 

Payment holidays

The results explained that the group maintained “full alignment” with the industry approach to offering customers payment holidays for credit cards and loans, and interest-free overdrafts (up to the industry’s £500 limit) for personal current accounts.

 

Tesco said it is providing support to those customers who have advised the group that they are experiencing financial difficulty as a result of the Covid‐19 pandemic. During the year, Tesco granted temporary payment holidays with a total value of £762m, to 139,673 credit card and personal loan customers.

 

These were for an initial period of up to three months and have in some cases been extended by a further three months. Of the payment holidays granted at 28 February 2021, 126,012 have ended, with 85.8% of customers returning to normal payment schedules.

 

Tesco said it undertook customer research to help identify the best solutions for those customers in financial difficulties. New forbearance treatments were launched in response to this work, combined with the payment holidays and fee amendments, which have helped prevent over 100,000 customers from going into arrears.

 

The group completed the sale of the majority of its mortgage business on 27 September 2019 for a cash consideration of £3.7bn.

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