Tesco, the leading supermarket group in the UK, has announced that it will be selling its banking operations to Barclays in a strategic deal. This move will allow Tesco to focus on its core retail operations while also unlocking greater value for both customers and the business.
As part of the agreement, Tesco will sell its existing banking operations in credit cards, loans, and savings, which will remove £7.7 billion of capital-intensive assets and £6.7 billion of financial liabilities from its balance sheet. However, Tesco will retain all other existing activities of Tesco Bank, including insurance, ATMs, travel money, and gift cards, which are considered capital-light.
The majority of the proceeds from the sale will be returned to shareholders through an additional share buyback. This decision will further strengthen Tesco’s position in the market and provide financial benefits to its investors.
In addition to the sale, Tesco and Barclays have formed a strategic partnership that will last for an initial period of 10 years. This partnership will see Barclays offering Tesco-branded banking products and services, creating new distribution channels for Barclays’ unsecured lending and deposit businesses.
Both Tesco and Barclays expressed their enthusiasm for the collaboration and the opportunities it presents. Ken Murphy, Tesco Group Chief Executive, emphasized the importance of Tesco Bank and its ability to help customers manage their money for over 25 years. He stated that the strategic transaction and partnership with Barclays will enable Tesco to become the best provider of financial services in the UK.
C S Venkatakrishnan, Barclays Group Chief Executive, highlighted the benefits of the partnership, stating that it will allow Barclays to utilize its expertise in partnership cards and enhance the highly successful Tesco Clubcard loyalty scheme. He also noted that this collaboration with Tesco demonstrates Barclays’ continued investment in its UK consumer business.
This news comes after Sainsbury’s announced its decision to wind down its banking business and focus on core retail operations while offering financial products through third parties. Tesco’s move highlights its commitment to adapt and evolve in the ever-changing retail landscape, ensuring its continued success and ability to meet the needs of its customers.
The deal between Tesco and Barclays is expected to bring significant advantages to both entities, allowing them to leverage each other’s strengths and resources. Tesco’s decision to sell its banking operations and form a strategic partnership with Barclays demonstrates its dedication to delivering the best financial services to its customers, while also optimizing value for its shareholders.
