Tesco Rises After Unveiling £700 Million Buyback With Bank Sale

(Bloomberg) -- Tesco Plc shares rose after the grocer unveiled plans to return £700 million ($903 million) to shareholders as it completed the sale of its retail banking operations to Barclays Plc.

The new buyback will commence after Tesco finishes a £1 billion share repurchase program that is currently underway, according to a statement. The grocer’s shares rose as much as 1.1% in London.

For Barclays, the deal will help boost pretax profit by about £300 million in the fourth quarter.

“Today marks a significant step as we continue to grow Barclays UK,” Vim Maru, chief executive of Barclays UK, said in the statement.

British retailers have been exiting financial services after a largely unsuccessful attempt to add competition to the sector. Tesco’s rival J Sainsbury Plc agreed to offload its banking business to NatWest Group Plc earlier this year and on Thursday inked a deal to offload its Argos credit-card portfolio to NewDay Group for £720 million.

While all Tesco Bank employees and customers are transferring to Barclays, the supermarket chain will keep its existing insurance and money services activities, such as ATMs, travel money and gift cards. Those businesses require less capital.

For the banking business, Tesco and Barclays inked a 10-year partnership that will allow the British bank to continue using the grocer’s brands with the products.