LONDON - Barclays is making strategic moves to expand its retail banking sector, setting its sights on acquiring the profitable credit card and savings operations of Tesco (OTC:TSCDY) Bank. This potential acquisition comes at a time when Barclays is looking to fortify its UK retail arm in the face of a 10% decline in its share price since the start of 2023.
Tesco Bank, which was established in 1997 as a joint venture with a supermarket chain and became wholly owned in 2008, has been put up for sale. Barclays, among other potential buyers, submitted an indicative bid following last week's deadline for initial offers. The bank's interest in Tesco Bank's retail operations is part of a broader strategy to navigate market challenges and valuation uncertainties by pursuing growth through acquisitions.
The target sectors within Tesco Bank have shown robust performance, with the bank posting £57 million in earnings for the first half of the year. The entire bank has been valued at approximately £1.5 billion. Barclays' previous acquisition of Kensington Mortgages was also part of its plan to strengthen its position in the UK market.
Tesco Bank has evolved significantly since its inception, expanding its offerings to include insurance services and personal loans. The acquisition by Barclays could benefit from the expansive customer reach that Barclays offers post-acquisition. This comes after Tesco has taken steps to streamline its operations, including selling its mortgage portfolio to Lloyds Banking Group (LON:LLOY).
Barclays' proactive approach aims to reshape the UK banking sector by integrating Tesco Bank's lucrative segments into its portfolio. This move could potentially revitalize Barclays' stock performance and provide customers with an enhanced range of financial products and services.
InvestingPro Insights
In light of the recent strategic moves by Barclays, it's pertinent to highlight some InvestingPro insights. According to InvestingPro data, Barclays has a market cap of 26668.85M USD and an impressive P/E ratio of 4.1. The company has shown a revenue growth of 0.55% over the last twelve months as of Q3 2023.
InvestingPro Tips suggest that Barclays has raised its dividend for three consecutive years, which could be an attractive aspect for potential investors. The company is also trading at a low Price/Book multiple, indicating that it may be undervalued.
On the other hand, Tesco Bank, with a market cap of 21.91B USD, has shown a robust revenue growth of 10.24% over the last twelve months as of Q3 2023. InvestingPro Tips reveal that Tesco has a high earnings quality, with free cash flow exceeding net income. This could imply a strong financial health, making it a potentially valuable acquisition for Barclays.
As part of the InvestingPro subscription, which is currently on a special Black Friday sale with a discount of up to 55%, you can access many more tips. For Barclays, there are 8 additional tips and for Tesco, there are 12 more. These insights can help investors make informed decisions and understand the potential impact of Barclays' strategic move on their investments.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.