2,800 staff transfer
Tesco Bank sold to Barclays in £700 million deal
Tesco Bank, based in Edinburgh, is being sold to Barclays in a deal worth £700 million, it has been announced.
Barclays will acquire Tesco Bank’s credit cards, unsecured personal loans and deposits. It will mean Edinburgh losing another head office banking function. About 2,800 of its banking staff will transfer to Barclays.
The supermarket group will retain a number of the bank’s services such as insurance, ATMs, travel money, and gift cards. It has agreed a partnership with Barclays, initially for 10 years, under which Barclays will market Tesco-branded banking services.
Tesco will receive annual income 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.
The deal will remove £7.7bn of capital-intensive assets and £6.7bn of financial liabilities from the Tesco balance sheet.
In return, Tesco expects to receive c.£600m of proceeds, in addition to c.£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. The majority of this cash will be returned to shareholders in the form of an incremental share buyback.
The pro forma annual adjusted operating profit from the partnership and retained activities is anticipated to be in the range of c.£80m to c.£100m – more than half of the current year expected profits from Tesco Bank.
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.
“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.
“his 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.”