Barclays to acquire majority of Tesco’s banking division for around £600 million

The agreement comes after Sainsbury's, the second-largest supermarket in the UK, decided to wind down its banking division and start providing financial products through third parties last month.

It also occurs ahead of Barclays's full-year results announcement on February 20, which coincides with a critical strategy update. Investors are uneasy about the stock's poor performance in comparison to competitors.

Barclays is set to acquire Tesco's current credit card, loan, and savings business. Tesco will also contribute 8.3 billion pounds in unsecured loans and around 6.7 billion pounds in deposits.

All other current Tesco Bank operations, such as gift cards, travel money, insurance, and ATMs, will remain under Tesco's ownership.

A little over 2,800 Tesco employees will go to Barclays.

Additionally, Barclays and Tesco have established a strategic alliance that will last for ten years and allow Barclays to provide banking services and products under the Tesco brand while utilising Tesco's well-known Clubcard loyalty programme. An annual charge of fifty million pounds will be paid to Tesco.

It is anticipated that the collaboration and purchase will close in the second half of 2024, pending regulatory approval.

Tesco said that an additional share buyback will be used to distribute the majority of the revenues to shareholders, together with a special dividend of 250 million pounds that Tesco Bank will pay in August 2023.

(Sources: investing.com, reuters.com)