The £600 million deal features an “initial” agreement lasting 10 years.
The agreement involves the transfer of around 2,800 employees from Tesco Bank, which currently employs 3,540 people in its banking division, to Barclays. Tesco will continue to offer Tesco-branded banking products and services and will receive annual income for the use of its brand.
In its announcement, Tesco highlighted that the deal would remove £7.7 billion in capital-intensive assets and £6.7 billion in financial liabilities from its balance sheet. Besides the £600 million, Tesco anticipates an additional £100 million in net cash after addressing regulatory capital amounts and transaction costs.
Tesco will retain all other banking activities, including insurance, ATMs, travel money, and gift cards. The agreement is contingent on court sanction and regulatory approval, with completion expected in the second half of 2024.
Earlier reports suggested that Tesco was considering the sale of its banking unit last year.
Ken Murphy, Tesco’s group chief executive, stated, “The transaction will also significantly reduce our financial liabilities, strengthening our balance sheet and allowing us to focus on growing our core retail business. I’m immensely grateful to our colleagues for their dedication and excellent service, and I’m confident that this new partnership will enhance that success.”
Coimbatore Sundararajan Venkatakrishnan, Barclays’ group chief executive, expressed enthusiasm about collaborating with the Tesco team to ensure a smooth transition: “Subject to completion of the transaction, we look forward to welcoming Tesco Bank colleagues and customers to Barclays.”