If British banks were hoping for some good news last week they were wrong as one of the UK’s leading supermarket chains set its sights on luring retail customers away from the much-maligned high street banks.

Tesco, a UK supermarket goliath that made almost £4 billion net profit in the year ending February 2011 and sees 20 million people pass through its store every week, is setting its sights on the UK banking sector as a key area for strategic growth.

Tesco already has a very strong financial services division in credit cards and insurance, which pulled in £919 million in revenue over the same period outlined above – £254 million of which was net profit.

In credit cards, unbelievably it is only rivalled in the UK by Barclaycard in terms of sheer market presence.

A move now into retail deposits, and following in the footsteps of new ventures by NBNK, Virgin Money, and Metro Bank, is likely to unnerve senior executives within the various retail banks in the UK.

Tesco, with so many club card holders already, has a big reason why it could succeed.

Combine this with public distrust, bemusement and sheer contempt for the banks and there is certainly potential and timing on Tesco’s side.

Tesco operates in a fiercely competitive sector against the likes of Asda, Sainsbury’s, Morrissons, Aldi, and the Co-op – just to name a few.

It, therefore, begs the question why aren’t other supermarket chains in countries with less competition doing the same?

In Australia, Woolworths has steadily grown over the past decade to become the dominant player in that market, with only one major rival – Coles – to challenge it, in terms of its sheer size and weight.

However, the group has never really embraced the retail banking opportunities and even abandoned a debit card tie-up deal with Commonwealth Bank (the 800lb Gorilla of the banking sector) after a few short years.