Lloyds Banking Group has entered talks to buy Tesco Bank’s £3.7bn mortgage book, Sky News reports.
If completed, Lloyds would pay tens of millions of pounds to Tesco for the book.
Lloyds has become the preferred bidder after seeing off Santander UK and Royal Bank of Scotland.
David Hollingworth, associate director, L&C Mortgages, said: “The fact Lloyds is rumored to be frontrunner and RBS tabled a bid in June, shows there’s a definite appetite for the Tesco book.
“It’ll be the right quality those big brands will want to acquire. And it’s good news for those customers with Tesco that there’s some big brands looking to take that book on.”
In 2012 Tesco Bank began selling home loans. In May the lender stopped offering mortgages to new customers.
It has about 23,000 mortgage customers on its books.
Lloyds Banking Group remained the biggest mortgage lender in the country last year, according to UK Finance.
A list of the gross lending of its members showed that its lending increased from £41bn in 2017 to £42.5bn last year, with its market share rising slightly from 15.7% to 15.8%.
Investment bankers at Citi have been overseeing the sale process.
Both Tesco Bank and Lloyds Banking Group declined to comment.