Lloyds Banking Group has entered exclusive talks to purchase the £3.7bn mortgage book from the banking arm of supermarket giant Tesco.

Lloyds Bank, the UK’s largest mortgage lender, is due to report its half-year financial results today and has seen off competition from some of its biggest competitors including Santander UK and Royal Bank of Scotland (RBS) to secure preferred bidder status, which it will hold until the end of August.

Sky News, which first reported the potential deal, revealed that the banking giant has entered into exclusive talks with Tesco Bank to acquire the book of prime mortgages, with the intention of strengthening its position in the market.

Sources told Sky that Lloyds would be willing to pay tens of millions of pounds to Tesco in order to see their departure from the UK mortgage market.

Tesco Bank announced its plan to exit from the UK mortgage market two months ago, after the group reported it was “actively exploring” options to sell-off its £3.7bn mortgage portfolio. The lender had been offering mortgages since 2012.

However, Tesco Bank chief executive Gerry Mallon said the move was part of a strategic decision to “focus on serving a broader range of customers in more specific areas”.

“Our priority in any sale is to complete a commercially acceptable transaction with a purchaser who will continue to serve our customers well,” he added at the time.

Both Lloyds Bank and Tesco Bank declined to comment when contacted by MoneyAge.

Share Story: