Barclays acquires Tesco Bank’s retail banking

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Barclays Bank has entered into an agreement with Tesco Bank to acquire its retail banking business for an initial period of 10-years.

Through the partnership, Barclays will acquire Tesco’s retail banking business for 10-years, which includes credit cards, unsecured personal loans, deposits and its operating infrastructure, which will be marketed through Tesco’s existing distribution channels and on the open market.

In addition, the two banks will enter into a long term, exclusive strategic partnership, allowing Barclays to explore other opportunities to offer financial services to Tesco’s customers.

Coimbatore Sundararajan Venkatakrishnan, Group Chief Executive of Barclays, commented: “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.”

Barclays has said that the transaction involves the acquisition of approximately £8.3bn of unsecured lending balances with a credit quality consistent with its existing UK portfolios, explaining that the deal is expected to offer attractive financial returns over the term of the agreements and will increase the weighting of its unsecured lending business within Barclays UK.

Ken Murphy, Group Chief Executive of Tesco, commented: “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.”

It was reported that there were several banks interested in the deal, following the announcement by Tesco that it was exploring the idea of a sale last year.

Barclays has said that it intends to integrate the business into its operational infrastructure over time. Tesco’s business operates the UK’s largest loyalty scheme, which Barclays has said ‘represents a key opportunity to further our UK retail banking strategic ambitions’. 

The business also includes approximately 2,800 employees, encompasses technology and operational infrastructure and made an adjusted operating profit of approximately £85m in the 12 months ended February 2023. 

“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. Similar to our acquisition of Kensington Mortgages last year, this partnership with Tesco is a further demonstration of the investment we continue to make in our UK consumer business,” said Venkatakrishnan. 

Murphy added: “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.”

Through the agreement, Barclays expects approximately £4.2bn of gross credit card receivables and £4.1bn of gross unsecured personal loans, together with approximately £6.7bn in customer deposits.

It is reported that tangible net assets acquired at completion of the transaction are expected to be approximately £960m, including an expected credit loss allowance of approximately £490m.

“I’m hugely grateful to Tesco Bank colleagues for their dedication and excellent service to our customers, and I’m confident that this new partnership approach will build on that success,” said Murphy.

Venkatakrishnan concluded: “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.”