TESCO has agreed to buy out Royal Bank of Scotland’s share of their Tesco Personal Finance joint venture in a deal estimated to be worth close to £1 billion.

The supermarket giant made an informal offer for RBS’s 50% stake several weeks ago.

Although the bank initially rebuffed the approach, it is understood that talks began last month and a deal has now been agreed in principle.

Sources close to the talks expect an announcement of the sale to be made at Tesco’s annual meeting later this month.

RBS’s decision comes amid mounting speculation that the bank could struggle to sell its RBS Insurance operations.

It also comes as the bank’s shareholders run out of time to decide whether to support the £12 billion rights issue being launched to prop up its balance sheet. RBS shares closed on Friday at 228½p - just 28½p above the rights issue price.

Under the terms of the deal, RBS would continue to provide banking services to Tesco Personal Finance during a handover period. Tesco would then apply for its own banking licence from the Financial Services Authority.

The joint venture, which made about £130m last year, is run by Robin Bulloch, who is employed by RBS. Tesco has begun searching for his successor, who would run the business for the supermarket chain.

The stake sale is one of a number of RBS disposals to be announced imminently. The sale of its Angel Trains train-leasing business to Australia’s Babcock & Brown is expected to be announced this week.

RBS has not publicly committed to a sale of the insurance arm, which includes Churchill and Direct Line, and brings in about £500m in profits a year. Sir Fred Goodwin, RBS’s chief executive, is known to have strong emotional ties to the businesses.

Although a host of potential bidders have expressed an interest, industry sources believe it is unlikely any would match RBS’s £7 billion asking price.

Zurich, the Swiss insurance giant, is thought to lead the pack. Allstate, the US insurer, is also in the running, along with American rivals AIG and Travelers.

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