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Barclays buys Tesco Bank in £600m Deal


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Barclays has announced its acquisition of Tesco’s retail banking operations in a deal worth £600m, marking a significant move for the supermarket giant. As part of the agreement, Barclays will take over Tesco Bank’s credit cards, loans, and savings accounts, and will also have the opportunity to market Tesco-branded banking services. Approximately 2,800 Tesco banking staff members will transfer to Barclays as a result of the deal.

Tesco Bank, is a British retail bank which was formed in July 1997 (as Tesco Personal Finance). The bank was formed as part of a 50:50 joint venture between The Royal Bank of Scotland and Tesco, the largest supermarket in the United Kingdom.

Barclays plc is a British multinational universal bank, headquartered in London, England. Barclays operates as two divisions, Barclays UK and Barclays International, supported by a service company, Barclays Execution Services.

Tesco emphasized that customers do not need to take any action, as the supermarket will be reaching out to them in the coming months. While certain services such as insurance, ATMs, travel money, and gift cards will remain under Tesco’s control, the company has also entered into a partnership with Barclays. This partnership, initially set for a decade, will enable Barclays to market and distribute credit cards, unsecured personal loans, and deposits using the Tesco brand.

Following the announcement, Tesco’s shares experienced an initial rise of over 2% in early trading before settling back down, while Barclays’ shares saw a slight increase. Tesco’s CEO, Ken Murphy, expressed confidence that the deal would bolster the company’s finances and allow for further growth in its core retail business. However, Tesco stated that the majority of the proceeds from the deal would be returned to shareholders. This includes a £250m special dividend that Tesco Bank paid to the supermarket group in August of the previous year.

Moreover, the deal will enable Tesco to release £100m that was previously tied up for regulatory purposes, increasing the funds available for distribution to shareholders. Barclays plans to integrate the acquired business into its own operations gradually, and Tesco has assured that it will work closely with the bank to support the staff transitioning to Barclays.

Barclays Group CEO C.S. Venkatakrishnan highlighted the strategic value of this relationship with the UK’s largest retailer, emphasizing the creation of new distribution channels for Barclays’ unsecured lending and deposit businesses. He further mentioned that Barclays’ expertise in partnership cards, developed over decades in the US, would enhance the highly successful Tesco Clubcard loyalty scheme.

Industry analysts have noted that Tesco’s decision to divest from certain banking operations aligns with a broader trend among supermarkets to streamline their assets and prioritize their core food businesses. This move comes as grocers seek to reduce exposure to non-core activities and position themselves to compete in the ongoing price wars brought on by increased cost of living pressures.

A decade ago, supermarkets were seen as potential disruptors to the dominance of traditional high street banks. However, the rise of app-based banks like Starling and Monzo, combined with stricter regulation in the financial services sector, rendered the supermarket’s in-store branch networks less relevant. Tesco Bank, for instance, closed its current accounts a few years ago due to low customer usage, and is now following Sainsbury’s lead in fully withdrawing from the banking sector. Last month, Sainsbury’s announced plans for a phased withdrawal from its banking division in order to refocus on its core food business.

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