Tesco Bank’s retail banking operations are set to be acquired by Barclays in a £600m deal that will see about 2,800 banking employees transfer from Tesco to Barclays. Under the agreement, Barclays will take over Tesco Bank’s credit cards, loans, and savings accounts and market Tesco-branded banking services in the future.
Tesco customers do not need to take any action at this time as the transfer will not affect their existing banking services such as insurance, ATMs, travel money, and gift cards. However, the partnership between the two companies means that Barclays will serve as a partner for Tesco in the distribution and marketing of credit cards, unsecured personal loans, and deposits using the Tesco brand.
The announcement saw shares in Tesco rise over 1% in early trading while Barclays shares also saw a slight increase. The deal was described by Tesco’s chief executive Ken Murphy as a move that will fortify the supermarket’s finances and enable it to grow its core retail business. The majority of the proceeds from the sale of Tesco Bank’s retail banking operations are set to be returned to shareholders including a £250m special dividend paid by Tesco Bank to the supermarket group last year.
Barclays Group chief executive C.S. Venkatakrishnan highlighted the strategic nature of the relationship with Tesco as an opportunity to create new distribution channels for Barclays’s unsecured lending and deposit businesses. He emphasized that Barclays would work closely with Tesco to support transferred staff and enhance the Tesco Clubcard loyalty scheme through their partnership.
This development follows Sainsbury’s decision to withdraw from its banking division as it looks to refocus on its core food business.