Royal Bank of Scotland has sold its 50 per cent stake in a personal finance joint venture to partner Tesco for A$1.9 billion.

Britain’s largest retailer, Tesco believes its financial services company is poised to grow dramatically, delivering profits of A$2 billion a year in the future.

The joint venture, which has been in place for 11 years, currently generates profits of A$850 million a year.

Tesco Personal Finance (TPF) offers personal savings products, general insurance, loans, credit cards, online insurance comparisons and a network of ATMs.

Products are sold in-store, online and through call centres, while the retailer also offers some products in Ireland, Hungary and Poland.

Sixty per cent of sales come through the online channel that benefits from the Tesco brand.

“Services are bigger and are faster-growing markets than food,” Tesco chief executive officer Sir Terry Leahy said.

“Tesco’s clear strategy, set out a little more than 10 years ago, has created new service businesses attracting about 7 million customers.

“I believe Tesco’s special relationship with consumers will enable TPF as a wholly owned subsidiary to move its business to the next level.”

Leahy said future development of the business would see an increased presence in stores, a wider range of savings products and possibly a current account product.

He also believes the brand can be expanded internationally.

Royal Bank of Scotland group chief executive Sir Fred Goodwin said the sale was appropriate for taking the joint venture to its next stage of development.

“At this stage of its maturity it is appropriate for TPF to move to single ownership for the next stage of its growth and we wish them well with their future plans.”

The bank will make a profit of about A$1.039 billion on the sale, which will go towards the bank’s target of raising A$8 billion from asset sales.