Barclays UK has announced the acquisition of Tesco Bank’s retail banking business for an initial sum of £600 million.
The deal involves Britain’s largest supermarket group divesting its banking operations, including credit cards, loans, and savings, encompassing £8.3 billion of unsecured lending balances and £6.7 billion in customer deposits. This transition impacts 2,800 employees associated with the business.
In addition to the initial £600 million, an estimated £100 million of net cash is anticipated after regulatory settlements, augmenting Tesco Bank’s financial standing. Combined with a £250 million special dividend disbursed in August, Tesco anticipates having approximately £1 billion, with plans to primarily return it to shareholders through share buybacks.
Tesco Bank had previously divested its mortgage book and expressed interest in selling its banking business. Barclays emerged as a suitor, with the deal materializing after negotiations. Notably, other retailers, including Sainsbury, have also retreated from the banking sector, opting to wind down their banking operations.
Tesco will retain its other existing activities, such as insurance, ATMs, travel money, and gift cards, citing them as “capital-light, profitable businesses” integral to its core retail offerings.
Furthermore, Tesco and Barclays have forged a ten-year strategic partnership, enabling Barclays to offer Tesco-branded banking products and services. Leveraging the Tesco Clubcard loyalty scheme, the partnership aims to enhance customer value and loyalty.
CS Venkatakrishnan, group chief executive of Barclays, highlighted the strategic significance of the partnership, emphasizing the creation of new distribution channels for Barclays’ lending and deposit businesses.
Ken Murphy, group chief executive of Tesco, expressed confidence in the transaction’s ability to unlock greater value for customers and businesses, aligning with Tesco’s vision to become the premier provider of financial services in the UK.
Barclays UK intends to integrate Tesco Bank’s retail banking arm, which recorded a profit of £85 million in the fiscal year ending February 2023, into its operational infrastructure gradually. This acquisition underscores Barclays’ commitment to expanding its footprint in the retail banking sector and enhancing its product offerings to customers.
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Barclays UK buys Tesco Bank’s retail banking arm for £600M
