Tesco mulls RBS £1bn buy-out

Royal Bank of Scotland is preparing to sell its stake in Tesco Personal Finance back to the grocer as part of its plan to offload non-core assets, a Sunday newspaper has claimed.

The Sunday Times said RBS may sell its 50 per cent stake in the venture in a deal worth up to £1 billion after Tesco made an informal offer last week.

It is thought RBS will provide services to Tesco Personal Finance until Tesco can obtain a banking licence from the Financial Services Authority (FSA).

The report said initially RBS rebuffed the offer, but has since had a change of heart.

It added that a deal has now been struck and may be announced at Tesco's annual shareholder meeting later this month.

RBS said it would sell some of its assets to boost its capitalisation last month, when it also announced a £12 billion rights issue.

The bank is expected to sell its insurance division, which includes Direct Line and Churchill, and its train-leasing business Angel Trains.

The bank was also in the papers over the weekend on rumours it may replace its chairman, Sir Tom McKillop.

Several papers have claimed shareholders are rebelling against the current leadership and have launched a campaign to find a successor among senior City figures.