Tesco has taken full ownership of its Tesco Personal Finance (TPF) financial services, in a move that it says will generate £1 billion in profit from retailing services.

The grocer has acquired the Royal Bank of Scotland’s (RBS) 50 per cent shareholding in the financial services business for£950 million.

In a stock exchange announcement, Tesco said that the deal will allow it to offer a full-service retail bank to customers over time.

The grocer added that it was part of its strategy to increase its share in the fast-growth services market, including financial services, telecoms, the internet and home shopping. It is targeting£1 billion in profits a year from TPF – more than double last year's£400 million.

Tesco finance and strategy director Andrew Higginson has been appointed to a new board role as chief executive of retailing services and will relinquish his role as finance director of Tesco once a successor is found.

He will head a team that will include Benny Higgins – formerly of the retail banking divisions at both RBS and HBoS – as TPF chief executive and Iain Clink – who was until recently head of cards and direct finance at RBS – as TPF finance director.

Tesco Telecoms will be led by new chief executive Lance Batchelor, who joined Tesco a year ago as UK marketing director.

Tesco chief executive Sir Terry Leahy said: “Services are bigger and faster-growing markets than food. As consumers look to make every pound work harder, it is a good time for Tesco to expand its presence.”

Leahy said Tesco’s financial services strategy – unveiled more than 10 years ago – has attracted about 7 million customers.

“With a renewed focus on growth in the UK and internationally, we can unlock the true potential of Tesco’s retailing services,” he added.

Under new plans, TPF will have an increased presence in stores, a wider range of savings products and, “possibly in the future”, a current account product.