Tesco sells most of banking unit to Barclays for £600m

The deal will see Tesco sell its existing banking operations in credit cards, loans and savings, removing £7.7bn of capital-intensive assets and £6.7bn of liabilities from its balance sheet. About 2,800 Tesco workers will transfer to Barclays.

Tesco said it expected to rake in a further £100m after the settlement of regulatory capital amounts and transaction costs. Combined with the £250m special dividend paid by Tesco Bank last August, this is expected to result in a total of around £1bn, the majority of which will be returned to shareholders in the form of an incremental share buyback.

The duo also agreed a 10-year partnership 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.

Tesco will keep insurance, ATM, travel money and gift card operations. Combined, the pro forma annual adjusted operating profit from the partnership and retained activities is anticipated to be £80m - 100m - more than half of the current year expected profits from Tesco Bank.

Reporting by Frank Prenesti for Sharecast.com