The portfolio has a lending balance of circa £3.7bn and generated pre-tax profits of £9.1m in the 2018/19 financial year.

The entire residential mortgage portfolio and arrangements for the ongoing administration will be transferred to Halifax, a division of Bank of Scotland, a wholly owned subsidiary of Lloyds.

Customer accounts will be transferred to Halifax once transitional arrangements have been delivered, while beneficial ownership is anticipated to be transferred at the end of September 2019, with the legal title occurring by end of March 2020.

Gerry Mallon, chief executive at Tesco Bank, said: “In May, we announced our decision to stop new mortgage lending, while we explored our options to sell the mortgage book.

“Our focus is on how we best serve Tesco customers and align our resources effectively to their needs, while ensuring that our offer remains sustainable in the long term. 

“As a result, we made the decision to move away from our mortgage offering. 

“Our priority throughout has been to complete a commercially acceptable transaction with a purchaser who will continue to serve our customers well.

“After a thorough process, we are pleased to confirm that we have agreed the sale of our mortgage book to Lloyds Banking Group, operating under the Halifax brand.”

Tesco Bank’s strategy now consists of focusing on a reduced number of products and services, with reduced operating and funding costs.

The sales proceeds will be used for reinvestment into its customer offer, along with the ongoing transformation of the business and rebalancing of retail and wholesale funding sources.