Barclays buys Tesco bank for £600 million

BARCLAYS said it will acquire Tesco’s banking business as the lender seeks to establish a greater foothold in retail banking in the UK.

Barclays is expecting to pay about £600 million (S$1.02 billion) upon closing the deal, according to a statement. The transaction includes £4.2 billion of credit-card receivables, £4.1 billion of unsecured personal loans and £6.7 billion in customer deposits, the companies said. 

Tesco said in a separate statement that – taking into account the release of regulatory capital and an earlier dividend paid by Tesco Bank – it expects to receive around £1 billion in cash from the sale. The grocer said it will use the majority of this for a share buyback.

The transaction, subject to regulatory approvals, is expected to complete in the second half of 2024.

The two companies will also enter into a 10-year deal that allows Barclays to use the Tesco brand to market and distribute credit cards, unsecured personal loans and deposits, according to the statement. 

“This strategic relationship with the UK’s largest retailer will help create new distribution channels for our unsecured lending and deposit businesses,” Barclays chief executive officer CS Venkatakrishnan said in the statement. 

The deal is expected to reduce Barclays’ common equity tier 1 ratio by 0.3 per cent, according to the statement. The bank doesn’t expect the deal to materially impact financial returns or shareholder distributions. BLOOMBERG