Tesco has announced the sale of its banking arm to Barclays in a deal worth up to £1bn.
The UK’s largest retailer, which had been in discussions with other major lenders including HSBC and Lloyds, said all 2,800 staff at Tesco Bank would transfer to Barclays under the agreement over time.
Hundreds of other workers across its wider financial services interests, including insurance, gift card and cash machine operations, were not affected by the bank’s sale.
The company told Tesco Bank’s five million customers they did not need to take any action and they would be contacted in due course.
The banking giant expects to pay roughly £600m for Tesco Bank’s credit cards, unsecured personal loans, deposits and operating systems.
Up to £400m more was expected following the conclusion of several other processes, Tesco said, adding that the total sum would be returned to shareholders in the form of a share buyback under its proposals.
They would remove £7.7bn of capital-intensive assets and £6.7bn of financial liabilities from its balance sheet.
Tesco said the deal, subject to regulatory clearances, marked the start of a strategic partnership with Barclays that would last for an initial 10 years.
“The partnership will allow us to offer customers Tesco-branded banking products and services, benefiting from the power of Tesco Clubcard, the UK’s largest loyalty programme, in addition to exploring other opportunities to offer value to Tesco and Barclays customers,” the statement said.
“Under the terms of the agreement, we will receive annual income for the use of the Tesco brand, for growing the customer base through Tesco channels and as a result of Barclays’ participation in the Tesco Clubcard programme.
Ken Murphy, Tesco’s chief executive, said of the deal: “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.”
Sky News revealed a year ago how Tesco had reinitiated a process that could have led to the banking arm’s sale.
It had previously offloaded its existing mortgage book to Lloyds for £3.8bn in 2019.
This breaking news story is being updated and more details will be published shortly.
Please refresh the page for the fullest version.