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(Alliance News) - Barclays PLC and Tesco PLC on Friday announced an agreement for Barclays to buy the retail banking business of Tesco Bank, as the big UK supermarkets scale back their forays into financial services.
London-based Barclays and Welwyn Garden City, England-based Tesco also announced a 10-year exclusive partnership that will see Barclays market Tesco-branded credit cards, unsecured personal loans and deposits to customers through Tesco's distribution channels as well as on the open market.
Tesco said it will sell to Barclays all of its banking operations in credit cards, loans and savings to Barclays, while retaining other activities of Tesco Bank including insurance, automatic teller machines, travel money and gift cards. The supermarket noted that these businesses are capital-light, profitable, and have a strong connect to its core retail offer.
Transferring to Barclays will be GBP8.3 billion in unsecured lending balances - split roughly equally between credit card receivables and unsecured personal loans - as well as 2,800 Tesco employees.
Barclays will pay about GBP600 million for the business, which has been in operation for more than 25 years. Tesco noted it will receive about GBP1 billion in cash in total, including a special dividend of GBP250 million paid by Tesco Bank back in August.
The deal is expected to be completed in the second half of 2024.
"The transaction will...significantly reduce our financial liabilities, in turn strengthening our balance sheet and allowing us to focus on continuing to grow our core retail business," said Tesco Chief Executive Ken Murphy.
Rival UK supermarket chain J Sainsbury PLC last month announced a phased withdrawal from its core banking business. This followed a review of its Financial Services division as part of its 'Food First' strategy.
Barclays Chief Executive CS Venkatakrishnan commented: "This strategic relationship with the UK's largest retailer will help create new distribution channels for our unsecured lending and deposit businesses."
He added: "This partnership with Tesco is a further demonstration of the investment we continue to make in our UK consumer business."
By Tom Waite, Alliance News editor
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