Uk retailer, Tesco has announced it will sell its banking business to Barclays as part of a new, long-term strategic partnership.
In a statement, the company said its existing banking operations in credit cards, loans and savings will be sold to Barclays, removing £7.7 billion of capital-intensive assets and £6.7 billion of financial liabilities from the Tesco balance sheet.
Tesco said it expects to receive £700 million from proceeds and further net cash after the settlement of certain regulatory capital amounts and after transaction costs.
Combined with the previously announced special dividend of £250 million paid by Tesco Bank in August 2023, the total cash received by Tesco will be around £1bn, with the majority to be returned to shareholders in the form of an incremental share buyback, the retailer said.
As part of the new deal, which will run initially for ten years, Barcalys will offer customers Tesco-branded banking products and services with the retailer receiving an annual income in return, This will be for the use of the Tesco brand, for growing the customer base through Tesco channels and as a result of Barclays’ participation in the Tesco Clubcard programme, Tesco said.
All other existing activities of Tesco Bank, including insurance, ATMs, travel money and gift cards will be retained. Around 2,800 Tesco Bank colleagues working on banking products, including the senior management team, will also transfer to Barclays.
Ken Murphy, Tesco Group Chief Executive: said “Tesco Bank is a strong business that has helped millions of loyal customers to manage their money for more than 25 years. As we look to the future, our aim is to be the best provider of financial services in the UK, with this strategic transaction and partnership with Barclays unlocking greater value for customers and for our business.
He added: “By working with one of the UK’s leading banks, we can bring customers new and innovative propositions, which will continue to benefit from Tesco Clubcard’s unique insight and digital capabilities.”
C.S. Venkatakrishnan, Barclays Group Chief Executive: said “This strategic relationship with the UK’s largest retailer will help create new distribution channels for our unsecured lending and deposit businesses. We are able to bring our expertise in partnership cards developed over decades in the US to enhance further the highly successful Tesco Clubcard loyalty scheme.”
