The world's third largest retailer and Britain’s largest supermarket Tesco is planning to take advantage of the shortage of mortgages offered by banks caused as a result of the credit crunch.

Its Tesco Personal Finance (TPF) counterpart will also be progressing into a full-blown bank and is planning to offer its customers current accounts, savings accounts, loans, credit cards and insurance products.

Chief executive Sir Terry Leahy said: “There is an opportunity to go faster with Tesco Personal Finance now and we are excited about the potential. It will become a full service retail bank and that offers huge scope for the long term.”

Tesco bought out Royal Bank of Scotland in July, paying £1billion for its half-share in TPF.

Finance director Andy Higginson, who will run TPF, said “Customers are looking for a service they can trust and somewhere it’s safe to put their money. People are generally worried about where to put their savings in this kind of environment and there is an opportunity for a challenger brand like Tesco to come in.”

He added that customers had heavily invested in the business over the last week after moving savings across from elsewhere.

The news came as Tesco reported an 11.3 per cent rise in half-year pre-tax profits to £1.43billion, topping City forecasts and sending shares up from 17.7p to 387.6p.

Sir Terry said he was happy with the customers' response to the new range of 400 discount brands launched in September, putting them into direct competition with budget stores like Aldi and Lidl.

Tesco’s value range makes up only six per cent of its overall sales, however, this figure beats Aldi's entire UK turnover.

Tesco plans to open 6 non-food Homeplus stores over the next 6 months in cities including Nottingham and Edinburgh.

Sir Terry also said that Tesco had written to the Bank of England urging it to cut interest rates.