Tesco, a British food retailer, has invited potential buyers to submit non-binding offers for Tesco Bank as part of its efforts to downsize its financial services footprint, Reuters reported Friday (Nov. 17), citing unnamed sources.
While Barclays has already made an indicative bid, other bidders are expected to participate in the process, according to the report.
Neither Barclays nor Tesco immediately replied to PYMNTS’ request for comment.
Tesco Bank was launched in 1997 as a joint venture between Tesco and the Royal Bank of Scotland, according to the report. However, Tesco later acquired full control of the company. Over the years, Tesco has scaled back its banking services, discontinuing current accounts and selling its mortgage portfolio to Lloyds Banking Group.
Despite this, Tesco Bank remains an attractive prospect for potential buyers due to the opportunity to cross-sell banking products to Tesco’s vast customer base, the report said.
Barclays has expressed particular interest in Tesco Bank’s credit card and savings account products, per the report. An acquisition of Tesco Bank would strengthen Barclays’ domestic retail banking division, while the group is currently undergoing efforts to revive its share price. Barclays’ shares have declined by approximately 10% since the beginning of the year.
While Tesco Bank’s offerings may be appealing to other lenders, challenging market conditions could dampen the appetite of potential buyers, according to the report.
The exact valuation of the proposed deal has not been established, the report said. Tesco Bank reported pre-tax profits of 57 million pounds (about $71 million) in the six months leading up to Aug. 31, with a book value of nearly 1.5 billion pounds (about $1.9 billion) at the end of the period.
It was reported in September that Barclays was planning to cut hundreds of jobs, following many other financial institutions that have done the same. CEO C.S. Venkatakrishnan said at the time that these plans are in line with the broader financial industry.
Observers have attributed the cuts being made at many banks to the organizations over-hiring during the previous two or three years, and managers seeking to reduce costs and maintain a reasonable return.