Tesco said on Friday it would sell Tesco Bank's retail banking business to Barclays for an initial £600 million, then another £100 million after settling some regulatory capital amounts and after transaction costs.
The UK supermarket chain said it would use a total majority of £1bn, which also includes a previously announced special dividend from Tesco Bank, to buy back shares.
It will retain insurance, ATMs, travel money and gift cards, which on a pro forma basis represent approximately £80m to £100m of operating profit, and said the deal is slightly accretive to earnings per share.
Barclays said it would acquire credit cards, unsecured personal loans, deposits and operational infrastructure including £8.3 billion of unsecured lending balances with credit quality consistent with its existing portfolios in the UK. The company it is buying generated adjusted operating profits of around £85m in the 12 months to February 2023.
Barclays will also enter into an exclusive strategic partnership with Tesco for an initial period of 10 years to market and distribute credit cards, unsecured personal loans and deposits using the Tesco brand, paying £50 million annually.
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Barclays BARC shares are down 3% this year.
Its shares fell by 7%.
