This follows the news from early last year that the supermarket was considering a sale of its banking arm.
The acquisition and partnership are subject to regulatory approval and expected to complete in the second half of 2024. Once completed, about 2,800 workers in the supermarket’s banking arm, including senior management, will move to Barclays.
The partnership will combine the supermarket’s brand, physical and digital reach with Barclays’ financial services capabilities and expertise in commercial partnerships.
The deal includes Tesco credit cards, loans and savings, but insurance, travel money, gift cards and cash machines will remain with the supermarket.
Under the terms of the agreement, the supermarket will receive annual income for the use of its brand, for growing the customer base through Tesco channels, and as a result of Barclays’ participation in the Clubcard programme.
The deal is worth about £1bn in total, made up of an initial £600m, a further £100m after the settlement of certain regulatory capital amounts, and a previously announced special dividend of £250m paid by Tesco Bank in August 2023.
The supermarket said the majority of this cash will be returned to shareholders in the form of an incremental share buyback.
‘Unlocking greater value’
Ken Murphy, Tesco Group chief executive, said: “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.”
C.S. Venkatakrishnan, Barclays Group chief executive, said: “Barclays is a leading consumer bank in the UK. 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 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.”
