Tesco to sell banking arm to Barclays in £700m deal

Tesco shares ticked higher on Friday after the supermarket announced it would dispose of its banking arm as part of a strategic partnership with Barclays.

Supermarkets have faced calls from shareholders to streamline their businesses and focus on core operations.

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Tesco will sell its banking arm to Barclays in a deal worth up to £700m and will receive annual income from Barclays for the use of the Tesco brand.

Tesco said it plans to use the proceeds of the sale to launch a share buyback programme.

Tesco shares were 1% higher at the time of writing.

“Tesco shareholders are in-line for an incremental share buyback after selling the bulk of its banking operations to Barclays for around £600m,” said Sophie Lund-Yates, lead equity analyst, Hargreaves Lansdown.

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“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. The move makes a great deal of sense, and adds weight behind one of Tesco’s main attractions – its ability to return cash to shareholders.”

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