Tesco Bank: what UK Barclays deal means for credit card holders, banking customers - and finance loans

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Tesco has outlined a few things for customers to be 'aware' of as the deal takes effect

Barclays is set to acquire Tesco Bank's retail banking operations for £600 million, as the largest supermarket in the UK shifts its attention towards its core food business.

The deal - which is expected to take place in the second half of 2024 - encompasses Tesco Bank's credit cards, loans, savings, and banking operations, with approximately 2,800 Tesco Bank staff gradually transitioning to Barclays.

The announcement follows rival supermarket giant Sainsbury’s announcing plans last month to wind down its banking division amid efforts to focus on the food business.

But how will the agreement affect you if you are an existing Tesco Bank customer, and is there anything you need to do? Here is everything you need to know about it.

What's happening?

Barclays said it expects to pay roughly £600 million for the retail banking operations, but Tesco said it could receive up to £1 billion once other costs are settled in the transaction, and taking into account a £250 million special dividend paid by the banking subsidiary to its parent company last year.

Barclays will take control of Tesco Bank's credit cards, loans, savings and banking operations as part of the deal. However, some remaining elements of the supermarket bank – including its insurance products, travel money, gift cards, and ATMs – are not included.

Barclays will take on Tesco Bank’s credit cards and unsecured personal loans, worth about £8.3 billion, and approximately £6.7 billion in customer deposits, provided the acquisition is completed by the end of July next year.

Furthermore, the two companies have agreed to a partnership, initially for a 10-year period, which means Barclays can market and distribute credit cards, loans and savings under the Tesco brand.

The Tesco Bank in Renfield Street in Glasgow (Photo: Jeff J Mitchell/Getty Images)The Tesco Bank in Renfield Street in Glasgow (Photo: Jeff J Mitchell/Getty Images)
The Tesco Bank in Renfield Street in Glasgow (Photo: Jeff J Mitchell/Getty Images)

Tesco will receive an income for the use of its brand, for growing customers through its channels and as Barclays will participate in the Tesco Clubcard scheme, which is the UK’s largest loyalty programme.

The banking giant said it is using its existing resources to pay for the acquisition. As part of plans to simplify the bank, it is currently in the process of trying to sell its German consumer business.

The retailer said the deal will help it trim its debts, strengthening the balance sheet and allowing it to be laser-focused on its core retail business.

Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said: “Tesco is streamlining the balance sheet, having parted ways with its credit cards, loans and savings operations.

“Doubling down on the core food business is a trend we’re seeing many of the grocers adopt, as they reduce exposure to non-core activities and get ready to win the price wars, which have been raging since cost of living pressures soared.”

What does it mean for Tesco Bank customers?

Tesco Bank has told its more than five million customers that they do not need to take any action and will be contacted over the coming months.

In an update posted to its website, Tesco Bank said customers should be "aware" of the following:

  • There is no immediate impact on your account
  • The sale to Barclays is expected to take place in the second half of 2024
  • Any important changes will be communicated to you before thenAny important changes will be communicated to you before then
  • Under the strategic partnership with Barclays, Tesco Bank customers will continue to earn Clubcard Points when you spend on a Tesco Bank Credit Card or Clubcard Pay+
  • Tesco Bank Savings Accounts continue to be covered by the Financial Services Compensation Scheme

Ken Murphy, Tesco’s group chief executive, said the deal will unlock “greater value for customers and for our business” and means it can “bring customers new and innovative propositions”.

CS Venkatakrishnan, Barclays’ boss, said: “We are looking forward to working closely with the team at Tesco over the coming months to enable a smooth transition and, subject to completion of the transaction, we look forward to welcoming Tesco Bank colleagues and customers to Barclays."

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