Barclays announced that Barclays Bank UK PLC agreed to acquire Tesco’s retail banking business and enter into an exclusive long-term partnership to offer Tesco-branded credit cards, personal loans, and deposits. Tesco’s retail banking customer base is broadly similar to Barclays UK’s existing customers and will complement the current business, as well as build on the existing UK strategic partnerships with other leading retail, consumer electronics and loyalty program brands.
This acquisition and partnership are subject to regulatory approval and expected to complete in the second half of 2024. And once completed, Barclays will welcome approximately 2,800 Tesco colleagues to Barclays.
This partnership will enable Tesco to offer customers Tesco-branded banking products and services, benefiting from the power of Tesco Clubcard, the UK’s largest loyalty program, 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 the Tesco 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 £7.7 billion of capital-intensive assets and £6.7 billion of financial liabilities from the Tesco balance sheet . And in return, Teso expects to receive c.£600 million of proceeds, in addition to c.£100 million 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, this is expected to result in total cash received by Tesco of around £1 billion. The majority of this cash will be returned to shareholders in the form of an incremental share buyback.
Tesco will retain all other existing activities of Tesco Bank, including insurance, ATMs, travel money and gift cards. Combined, the pro forma annual adjusted operating profit from the partnership and retained activities is anticipated to be in the range of c.£80 million to c.£100 million – more than half of the current year expected profits from Tesco Bank.
The completion of the disposal and entry into the strategic partnership is conditional on court sanction and regulatory approval or non-objection, as is typical in the transfer of banking operations, with completion expected to occur during the second half of calendar year 2024.
KEY QUOTES:
“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.”
– C.S. Venkatakrishnan, Group Chief Executive of Barclays
“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.”
– Ken Murphy, Tesco Group Chief Executive
