Tesco said on Friday it would sell Tesco Bank’s retail banking business to Barclays initially for £600m, and then for a further £100m after settlement of certain amounts of regulatory capital and net of transaction costs.
The British supermarket chain said it will use the majority of the overall £1 billion sum, which also includes a special dividend previously announced by Tesco Bank, for a share buyback.
It will retain insurance, cash machines, travel money and gift cards, which on a pro forma basis account for around £80-100m of operating profit, and said the deal will slightly boost earnings per share.
Barclays said it is acquiring credit cards, unsecured personal loans, deposits and operational infrastructure comprising £8.3 billion of unsecured loan balances of a credit quality consistent with its existing UK portfolios. The business it is buying reported adjusted operating profit of around £85 million in the 12 months to February 2023.
Barclays will also enter into an exclusive strategic partnership with Tesco for an initial 10-year period to market and distribute credit cards, unsecured personal loans and deposits using the Tesco brand, paying £50m per year.
TescoTSCO,
shares are down 3% this year while Barclays BARC,
shares fell 7%.