Royal Bank of Scotland (RBS) is selling its 50 per cent stake in Tesco Personal Finance (TPF) to the supermarket.
The deal worth £950 million sees Tesco take control of the division offering insurance, savings and loans.
The supermarket now aims to increase profits from £240 million this year to £1 billion, while RBS will still provide financial services to Tesco.
Sir Terry Leahy, Tesco chief executive, 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.
"We have become a trusted supplier of innovative products and services offering great value and I believe Tesco's special relationship with consumers will enable TPF, as a wholly owned subsidiary of Tesco, to move its business to the next level."
TPF was established in 1997 as a joint venture between Tesco and RBS and now has 5.5 million customer accounts and offers more than 25 different products.
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