Barclays UK has announced that they will be acquiring Tesco Bank, the personal finance sector of the retail giant, for a sum of £600 million according to the official statement by Barclays. The two have also announced a ‘strategic partnership’ to see Barclays marketing and distributing credit cards, unsecured personal loans and deposits, under the Tesco name.
The statement also adds, “The transaction involves the acquisition of approximately £8.3 billion of unsecured lending balances with a credit quality consistent with our existing UK portfolios.” The acquisition also means the transfers of 2,800 employees, all the technology and infrastructure currently with Tesco, and a profit of £85 million. The Bank said they plan to “...integrate the business into its operational infrastructure over time”.
Tesco, alongside the initial sum of money, will receive about £50 million every year, as part of their strategic partnership. This will include royalties, new registration and Clubcard registration fees.
C.S. Venkatakrishnan, the Group Chief Executive of Barclays has stated, “This strategic relationship with the UK's largest retailer will help create new distribution channels for our unsecured lending and deposit businesses.” He believes that Tesco’s well-established loyalty card, the Tesco Clubcard, stands to gain from this venture, with Barclays bringing in “...expertise in partnership cards developed over decades in the US.”
The aim is to complete the transaction as smoothly as possible and make the process easy for the employees and customers affected. They also mentioned that this deal is one of many, as it “... is a further demonstration of the investment we continue to make in our UK consumer business.”
Ken Murphy, who is the Group Chief Executive of Tesco, in his statement, said that “... our aim is to be the best provider of financial services in the UK, with this strategic transaction and partnership with Barclays unlocking greater value for customers and for our business.” He added that the acquisition also gives customers “new and innovative propositions.”
Last month, Sainsbury’s also announced that they would be “phasing out” their banking sector. The scenario further cements the argument of how difficult it is to actually compete with High Street banks, as competitors lack the niches and specialisations which commercial banks possess. Both retail giants will look to improve their in-store experiences and quality, instead of dedicating valuable resources to their banking areas.
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