Tesco, the UK’s largest supermarket group, has entered into a £700 million deal with Barclays to sell the majority of its banking business. As part of the agreement, Barclays will acquire Tesco Bank’s credit card, loans, and savings operations, involving the transfer of approximately 2,800 staff to the bank. Tesco, however, will retain certain profitable elements of its banking services, including insurance, ATM, travel money, and gift card operations.
The deal is structured with Tesco receiving £600 million from Barclays initially, followed by an additional £100 million in net cash once regulatory and associated costs are settled. In addition to the sale, both companies have entered into a broader 10-year exclusive partnership agreement. Under this arrangement, Barclays will sell Tesco-branded banking products and services while utilizing the Tesco Clubcard scheme. In return, Tesco will receive £50 million in annual income from royalty, new account, and Clubcard participation fees.
Tesco’s CEO, Ken Murphy, highlighted the strategic nature of the transaction, stating that it would unlock greater value for customers and the business. He emphasized the company’s commitment to becoming the leading provider of financial services in the UK. The sale of banking assets will also allow Tesco to focus on its core retail business while strengthening its balance sheet.
As part of the deal, about 2,800 Tesco Bank staff, including the senior management team, will be transferred to Barclays. The transaction is expected to remove £7.7 billion of “capital-intensive assets” and £6.7 billion of financial liabilities from Tesco’s balance sheet.
Barclays’ CEO, CS Venkatakrishnan, sees the partnership as an investment in their UK consumer business. The completion of the transaction is subject to regulatory approval, and both companies are preparing for a smooth transition.
This move by Tesco comes amid a trend in the retail sector, with Sainsbury’s Bank recently signaling its intent to exit the banking business after a strategic review suggested it could be a distraction from core retail operations.