Two British retail giants are pulling out of banking: Tesco is selling its banking division to Barclays, following Sainsbury’s recent example. Both had high ambitions in the financial sector, but achieving a decent market share proved more difficult than expected.
Barclays is acquiring Tesco Bank for 600 million pounds (700 million euros). The deal includes all credit cards and unsecured personal loans. However, gift cards, ATMs and insurances will still be offered under the Tesco brand.
The deal involves a 10-year distribution agreement to sell financial products under the Tesco brand name, the Financial Times reports. These fit with the retailer’s core offering, have a low demand on capital and are profitable, the retailer argues.
Earlier, Sainsbury’s had also reported that it would phase out its banking operations and instead start selling financial services through third parties. Both chains threw themselves into banking in their expansion drive in the 1990s, hoping to grab market share easily and cheaply. However, that did not turn out to be so easy.
Barclays is taking over 2,800 employees from Tesco. The deal is expected to be completed in the second half of the year, following approval from the competition watchdog. Tesco CEO Ken Murphy says he will invest the proceeds from the sale in new and innovative propositions for customers.