The acquisition includes Tesco Bank’s credit cards, loans, and savings operations, encompassing £8.3 billion in unsecured lending balances and £6.7bn in customer deposits. The transaction involves 2,800 employees and is expected to yield an additional £100m in net cash after regulatory settlements.

In addition to the £600m initial payment, Tesco Bank is set to distribute a £250m special dividend in August. With these funds, Tesco anticipates having approximately £1bn, intending to return the majority to shareholders through share buybacks. This move follows Tesco’s prior sale of its mortgage book and aligns with its strategic decision to exit the banking sector.

The retained activities of Tesco Bank, including insurance, ATMs, travel money, and gift cards, are considered “capital-light, profitable businesses with a strong connection to our core retail offer”.

Barclays and Tesco have formed a ten-year strategic partnership, allowing Barclays to offer Tesco-branded banking products and services. The collaboration is expected to leverage the strength of the Tesco Clubcard loyalty scheme.

Ken Murphy, Tesco Group chief executive, said: “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.”

He continued: “The transaction will also significantly reduce our financial liabilities, in turn strengthening our balance sheet and allowing us to focus on continuing to grow our core retail business.

“I’m hugely grateful to our colleagues for their dedication and excellent service to our customers, and I’m confident that this new partnership approach will build on that success.”

Barclays UK plans to integrate Tesco Bank’s business, which reported a profit of £85m in the year to February 2023, into its operational infrastructure over time.

C.S. Venkatakrishnan, Barclays Group chief executive, said: “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.

“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.”