This announcement contains
inside information for the purposes of Article 7 of the Market
Abuse Regulation (EU) No. 596/2014 (as it forms part of domestic
law by virtue of the European Union (Withdrawal) Act 2018, as
amended)
9 February
2024
Barclays
PLC
Acquisition of Tesco's retail
banking business and long-term strategic partnership with
Tesco
Barclays PLC ("Barclays") announces
that Barclays Bank UK PLC ("Barclays UK") has entered into an
agreement with Tesco Personal Finance plc (operating using the
trading name "Tesco Bank") to acquire the retail banking business
of Tesco Bank, which includes credit cards, unsecured personal
loans, deposits and the operating infrastructure.
Additionally, Barclays UK will enter into a long-term,
exclusive strategic partnership with Tesco Stores Limited for an
initial period of 10 years to market and distribute credit cards,
unsecured personal loans and deposits using the Tesco brand, as
well as explore other opportunities to offer financial services to
Tesco customers.
Partnering with Tesco PLC ("Tesco"),
the UK's largest retailer which also operates the UK's largest
loyalty scheme, represents a key opportunity to further our UK
retail banking strategic ambitions. Barclays UK will market
Tesco-branded credit cards, unsecured personal loans and deposits
to customers through Tesco's distribution channels as well as on
the open market. The acquired customer base will complement
Barclays UK's current business, as well as build on the existing UK
strategic partnerships with other leading retail, consumer
electronics and loyalty programme brands.
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 transaction as a whole is expected to offer
attractive financial returns over the term of the agreements and
will increase the weighting of our unsecured lending business
within Barclays UK.
The business being acquired includes
approximately 2,800 employees, encompasses technology and
operational infrastructure and made an adjusted operating profit of
approximately £85 million in the 12 months ended February
20231. Barclays UK's intention is to integrate the
business into its operational infrastructure over time.
If completion of the transaction
were to occur at the end of July 2024, Barclays UK expects to
acquire approximately £4.2 billion of gross credit card receivables
and £4.1 billion of gross unsecured personal loans, together with
approximately £6.7 billion in customer deposits. Tangible net
assets acquired at completion of the transaction are expected to be
approximately £960 million, including an expected credit loss
allowance of approximately £(490) million. The consideration
payable by Barclays UK at completion is expected to be
approximately £600 million.2
The business will be acquired
through a banking business transfer under Part VII of the Financial
Services and Markets Act 2000. Completion of the acquisition
and entry into the strategic partnership is conditional on court
sanction and regulatory approvals or non-objection, and is expected
to occur in H2 2024.
Barclays expects that the
transaction announced today will not materially impact the planned
financial returns or distributions of Barclays and a further update
will be given as part of the previously announced investor update
on 20 February 2024.
The acquisition, which is being
financed from Barclays' existing resources, is expected to reduce
Barclays' CET1 ratio by approximately 0.3% upon completion (based
on Barclays' CET1 ratio as at 30 September
20233).
As previously disclosed, Barclays is
currently engaged in a process to sell its German consumer finance
business (comprising credit cards, unsecured personal loans and
deposits) as part of our ambition to simplify Barclays and support
our focus on growing our key businesses. Any sale, if agreed,
would be expected to be accretive to Barclays' CET1
ratio.
C.S. Venkatakrishnan, Group Chief
Executive of Barclays, commented:
"Barclays is a leading consumer bank in the UK. This
strategic relationship with the UK's largest retailer will help
create new distribution channels for our unsecured lending and
deposit businesses. We are able to bring our expertise in
partnership cards developed over decades in the US to enhance
further the highly successful Tesco Clubcard loyalty
scheme.
Similar to our acquisition of Kensington Mortgages last year,
this partnership with Tesco is a further demonstration of the
investment we continue to make in our UK consumer business.
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."
Ken Murphy, Group Chief Executive of
Tesco, commented:
"Tesco Bank is a strong business that has helped millions of
loyal customers to manage their money for more than 25 years.
As we look to the future, 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. By working with one of the UK's leading
banks, we can bring customers new and innovative propositions,
which will continue to benefit from Tesco Clubcard's unique insight
and digital capabilities. I'm hugely grateful to Tesco Bank
colleagues for their dedication and excellent service to our
customers, and I'm confident that this new partnership approach
will build on that success."
Notes:
1.
Adjusted operating profit is based on
management accounts and reflects an estimated allocation of income
and expenses between the acquired business and activities retained
by Tesco Bank. It includes the estimated impact of
transitional service arrangements but excludes the full impact of
payments to be made under the strategic partnership
agreement.
2.
The exact consideration
payable will depend on movements in the tangible net assets and
expected credit loss allowance up to completion of the
transaction.
3.
Barclays' CET1 ratio was
14.0% as at 30 September 2023.
4.
Under the terms of the
strategic partnership with Tesco for Barclays UK to market and
distribute credit cards, unsecured personal loans and deposits
using the Tesco brand, Barclays UK expects to pay Tesco royalty,
new account and Clubcard participation fees of approximately £50
million per annum in total.
- Ends -
For further information, please
contact:
Investor
Relations
Media Relations
Marina Shchukina
Jon Tracey
+ 44 (0) 207 116 2526
+44 (0) 7552214868
About Barclays
Barclays is a British universal
bank. We are diversified by business, by different types of
customer and client, and geography. Our businesses include consumer
banking and payments operations around the world, as well as a
top-tier, full service, global corporate and investment bank, all
of which are supported by our service company which provides
technology, operations and functional services across the Group.
For further information about Barclays, please visit our website
home.barclays.
Forward-looking statements
This announcement contains
forward-looking statements within the meaning of Section 21E of the
US Securities Exchange Act of 1934, as amended, and Section 27A of
the US Securities Act of 1933, as amended, with respect to the
Barclays Group. Barclays cautions readers that no forward-looking
statement is a guarantee of future performance and that actual
results or other financial condition or performance measures could
differ materially from those contained in the forward-looking
statements. These forward-looking statements can be identified by
the fact that they do not relate only to historical or current
facts. Forward-looking statements sometimes use words such as
'may', 'will', 'seek', 'continue', 'aim', 'anticipate', 'target',
'projected', 'expect', 'estimate', 'intend', 'plan', 'goal',
'believe', 'achieve' or other words of similar meaning. These
statements are based on the current beliefs and expectations of
Barclays' management and are subject to significant risks and
uncertainties. Actual outcomes may differ materially from those
expressed in the forward-looking statements. Factors that could
impact the Barclays Group's future financial condition and
performance are identified in the Barclays PLC's filings with the
US Securities Exchange Commission (the "SEC") (including, without
limitation, Barclays PLC's Annual Report on Form 20-F for the
fiscal year ended 31 December 2022, as amended), which are
available on the SEC's website at www.sec.gov. Subject to Barclays'
obligations under the applicable laws and regulations of any
relevant jurisdiction (including, without limitation, the UK and
the US), in relation to disclosure and ongoing information,
Barclays undertakes no obligation to update publicly or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise.
