Tesco sells banking arm to Barclays in £700m deal

Tesco has announced the sale of its banking arm to Barclays in a £700m deal. Initially for a 10-year period, the partnership will combine Tesco’s market-leading brand, physical and digital reach and relentless customer focus with Barclays’ financial services capabilities and expertise in commercial partnerships. The partnership will allow the retailer to offer customers Tesco-branded banking products and services, benefiting from the power of Tesco Clubcard, the UK’s largest loyalty programme, in addition to exploring other opportunities to offer value to Tesco and Barclays customers. Under the terms of the agreement, Tesco will receive annual income for the use of its brand, for growing the customer base through Tesco channels and as a result of Barclays’ participation in the Tesco Clubcard programme. The existing banking operations in credit cards, loans and savings will be sold to Barclays, removing £7.7bn of capital-intensive assets and £6.7bn of financial liabilities from the Tesco balance sheet . In return, the retailer is expected to receive £600m of proceeds, in addition to £100m further net cash after the settlement of certain regulatory capital amounts and after transaction costs. Combined with the previously announced special dividend of £250m paid by Tesco Bank in August 2023, this is expected to result in total cash received by Tesco of around £1bn. As a result of the deal, around 2,800 Tesco Bank workers, including the senior management team, will transfer to Barclays and will continue to offer customers the same service. 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. 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. “The transaction will also significantly reduce our financial liabilities, in turn strengthening our balance sheet and allowing us to focus on continuing to grow our core retail business. I’m hugely grateful to our colleagues for their dedication and excellent service to our customers, and I’m confident that this new partnership approach will build on that success.” 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. “This partnership with Tesco is a further demonstration of the investment we continue to make in our UK consumer business. We are looking forward to working closely with the team at Tesco over the coming months to enable a smooth transition and, subject to completion of the transaction, we look forward to welcoming Tesco Bank colleagues and customers to Barclays.”

Tesco sells banking arm to Barclays in £700m deal

The partnership will allow the retailer to offer customers Tesco-branded banking products and services

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