Barclays to acquire most of UK’s Tesco Bank for £600m

Tesco Bank Barclays

Barclays Bank UK announced that it has entered an agreement to acquire the retail banking arm of Tesco Bank, including credit cards, loans and savings, for approximately £600 million.

In addition to that, the pair have also signed a long-term exclusive partnership, initially for a period of 10 years.

This will include the right to use the Tesco brand to offer an array of financial services to customers, including the marketing and distribution of credit cards, unsecured personal loans and deposits, as well as exploring other opportunities to offer financial services to Tesco customers.

As part of the deal, approximately 2,800 Tesco Bank employees including the senior management team and those working on banking products, as well as its technology and operational infrastructure, will transfer to Barclays UK. Over time, Barclays intends to integrate the business into its own operational infrastructure.

On completion of the transaction, which is expected to be by end of July this year, Barclays UK will acquire approximately £4.2 billion of gross credit card receivables and £4.1 billion of gross unsecured personal loans, together with approximately £6.7 billion in customer deposits. As part of the strategic partnership, Tesco expects to receive an annual income for the use of its brand, Barclays’ participation in Tesco’s Clubcard programme and for growing its customer base via Tesco channels.

Tesco will retain all other existing activities of Tesco Bank, including insurance, ATMs, travel money and gift cards. On reasons why it did so, Tesco said those activities are “capital-light, profitable businesses with a strong connection to our core retail offer”.

“This strategic relationship with the UK’s largest retailer will help create new distribution channels for our unsecured lending and deposit businesses,” commented C S Venkatakrishnan, group chief executive of Barclays. “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.”

Ken Murphy, Tesco group chief executive, added: “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.”

Completion of the acquisition and entry into the strategic partnership is conditional on court sanction and regulatory approvals or non-objection, and is expected to occur in the second half of
2024.

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