Barclays acquires Tesco banking operations in $775 million deal

Barclays, the London-based multinational bank, has finalized its acquisition of the majority of Tesco’s banking operations, enabling the supermarket chain, based in Welwyn Garden City, to return proceeds from the sale to its shareholders.

Originally announced in February, the deal includes Barclays acquiring credit cards, unsecured personal loans, and lending balances from Tesco for approximately £600 million ($775 million), with an additional £100 million to be paid following the settlement of regulatory capital amounts and transaction costs.

As part of the agreement, the 2,800 employees of Tesco Bank will be transferred to Barclays. Additionally, Barclays has secured a 10-year distribution agreement to offer financial products under the Tesco brand, which has been in operation for 25 years.

In a filing to the exchange, C.S. Venkatakrishnan, Group CEO of Barclays, stated, “This acquisition is an important step in increasing our investment in the U.K. We look forward to collaborating with Tesco Group on delivering Tesco-branded financial services.”

Tesco will reportedly maintain its current insurance and money services operations, which include ATMs, travel money, and gift cards. The supermarket chain believes these activities are “capital-light, profitable businesses that are closely aligned with our core retail offerings.”

Ken Murphy, Group CEO of Tesco, said, "Through our strategic partnership, customers will have access to new and innovative propositions, while continuing to enjoy the unique benefits of Tesco Clubcard.

On November 1, Tesco announced plans to return £700 million to shareholders through an additional share buyback, set to commence once its current £1 billion buyback program concludes.

This announcement came just a day after rival Sainsbury reportedly revealed it had reached an agreement to sell its Argos credit card portfolio to NewDay Group for £720 million. Earlier in June, Sainsbury had also announced the sale of its banking business to NatWest.

Reports suggest that in the 1990s, numerous British retailers attempted to enter the financial services market, but the results did not meet expectations, resulting in significant consolidation within the sector. A notable instance of this trend was Tesco Bank's 2019 sale of its mortgage portfolio to Lloyds Banking Group for £3.8 billion.