M&S plans to sell own mortgages

Marks & Spencer, the UK's biggest retailer, is considering selling its own-brand mortgages in a move that could help drive profits in its flagging financial services division.

The plans are at an early stage and it is unknown whether the firm has picked a bank or building society partner. But they are part of a strategy to grow M&S's financial services. The retailer is also looking to beef up its pensions offering.

The proposals, revealed by new chief executive Roger Holmes, come as operating profits in the firm's personal finance division - which offers a store card, loans and insurance - have dropped by a quarter in the past three years to £84.2 million.

Holmes, referring to financial services, said: 'There are all sorts of possibilities. Pensions and personal financial planning are a focus. This is a huge exercise.'

M&S Financial Services is headed by Laurel Powers-Freeling who joined the firm from Lloyds TSB. Last year it made an operating profit of £84.2m and contributed 13 per cent to group profits.

M&S has five million chargecard holders but only three million of them are active. They account for 20 per cent of total sales.

Although financial services may be lagging, M&S continues to report strong trading. Figures last week revealed sales up 9.1 per cent for the 14 weeks to 6 July with women's wear, up 14.8 per cent, being the strongest performer.

Holmes, who was appointed chief executive last Wednesday, told The Observer that M&S was plotting a growth course that will see 20 new stand-alone 'Simply Food' outlets. Holmes is also piloting two home furnishings shops.

Richard Hyman, chairman of retail consultant Verdict, said: 'For the likes of Bhs and Next, Marks & Spencer clawing its way back presents the biggest challenge. Out of these three, Marks is the strongest and its growth story has got a long way to go.'