Tesco Bank lifts profit in first half as lending grows

LONDON, Oct 23 (Reuters) - Tesco Bank said its trading profit increased by 15.9 percent to 102 million pounds ($164 million) in the six months to the end of August, driven by a strong increase in lending.

The bank, which is owned by Britain's biggest retailer, said on Thursday customer numbers grew by 13.9 percent compared with the year before despite greater competition.

Tesco Bank is one of a number of new lenders that have emerged to challenge Britain's biggest four banks - Royal Bank of Scotland, Lloyds Banking Group, Barclays and HSBC.

Tesco Bank said its mortgage business had grown to 1.03 billion pounds at the end of August compared with 697 million the year before.

The bank also said it had set aside another 27 million pounds to compensate customers mis-sold loan insurance.

Tesco Bank reiterated that its profit growth for the full year would be offset by investment in its new personal current account service, which was launched earlier this year.

The bank's parent, Tesco (Xetra: 852647 - news) , reported a larger than expected hole in its accounts, forcing it to scrap its full-year trading profit outlook. (1 US dollar = 0.6231 British pound) (Reporting by Matt Scuffham)