Tesco has sold its banking arm to Barclays in a deal worth up to £600m.

The supermarket said its 2,800 staff working at Tesco Bank will be transferred to Barclays as part of the deal.

The bank is set to pay Tesco £600m for its existing banking operations in credit cards, loans and savings.

Tesco said the sale will remove £6.7bn of financial liabilities and £7.7bn of capital-intensive assets from its balance sheet.

Subscribe to Retail Gazette for free

Sign up here to get the latest news straight into your inbox each morning 

The grocery giant added it will retain all other existing activities of Tesco Bank, including insurance, ATMs, travel money and gift cards as these are “capital-light, profitable businesses with a strong connection to our core retail offer”.

Tesco chief executive Ken Murphy said the sale will “significantly reduce our financial liabilities, in turn strengthening our balance sheet and allowing us to focus on continuing to grow our core retail business”.

He said: “Tesco Bank is a strong business that has helped millions of loyal customers to manage their money for more than 25 years.

“As we look to the future, our aim is to be the best provider of financial services in the UK, with this strategic transaction and partnership with Barclays unlocking greater value for customers and for our business.

“By working with one of the UK’s leading banks, we can bring customers new and innovative propositions, which will continue to benefit from Tesco Clubcard’s unique insight and digital capabilities.”

Click here to sign up to Retail Gazette‘s free daily email newsletter