Barclays is to acquire Tesco’s retail banking business in a £600m deal

Barclays is acquiring the majority of Tesco Bank’s retail banking business for £600 million.

The banking giant plans to acquire Tesco Bank’s credit cards, unsecured personal loans and deposits and market them for at least a decade in a strategic partnership with Tesco Stores.

Tesco will retain its insurance, ATM, gift card and travel money businesses, which it says are “capital-light, profitable businesses with a strong connection to our core retail offering”.

It follows plans announced by rival Sainsbury’s in January, which will see Britain’s second-largest supermarket chain phase out its banking activities and instead offer financial products through third parties.

Tesco expects to receive around £600 million in proceeds from the Barclays deal, followed by around a further £100 million in net cash once ‘certain regulatory capital amounts’ and transaction costs are settled.

An estimated 2,800 Tesco employees will also switch to Barclays as part of the deal.

The deal is expected to close in the second half of this year, with Tesco using most of the proceeds to fund a new share buyback program.

CS Venkatakrishnan, CEO of Barclays, said the partnership with Tesco is a ‘further demonstration of the investments we continue to make in our UK consumer business.’

Tesco’s boss, Ken Murphy, said: ‘As we look to the future, our aim is to be the best provider of financial services in Britain, with this strategic transaction and partnership with Barclays delivering greater value for customers and for our business will yield.

‘By working with one of Britain’s leading banks, we can offer new and innovative propositions to customers who will continue to benefit from Tesco Clubcard’s unique insight and digital capabilities.’