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NatWest is to buy most of Sainsbury’s banking business in the first significant deal by new chief executive Paul Thwaite and one that accelerates the supermarket sector’s exit after a failed push into financial services.
The state-backed bank said on Thursday it had agreed to buy £2.5bn of assets including unsecured loans and credit card deposits and £2.6bn of liabilities from the supermarket chain.
The deal does not include Sainsbury’s Bank’s cash machine, insurance and travel money business or Argos Financial Services. Sainsbury’s will pay NatWest £125mn as part of the deal.
Thwaite described the transaction as “a great opportunity to accelerate the growth of our retail banking business at attractive returns, in line with our strategic priorities”.
He added: “As well as a complementary customer base, the transaction is expected to add scale to our credit card and unsecured personal lending business within existing risk appetite.”
The deal is expected to complete in the first half of 2025.
Tesco, another UK supermarket group, and Sainsbury’s were among a wave of high-profile retailers that pushed into financial services in the 1990s, initially through joint ventures with established high-street banks.
In February, Barclays agreed to buy most of Tesco Bank’s assets in a £600mn deal.
Sainsbury’s, the UK’s second largest supermarket, said it expected to return £250mn to shareholders “once the phased withdrawal from its core banking business has been completed and the future model for Argos Financial Services is in place”.
The disposal, which comes after the chain struggled to find the right buyer for its banking operations, is part of chief executive Simon Roberts’s mission to simplify the business and focus on its food offering. Core Sainsbury’s Bank customers do not need to take any action for now as they transfer over to NatWest next year.
William Woods, a retail analyst at Bernstein, said that “overall . . . this was a good outcome for Sainsbury’s”.
Analysts at Jefferies said that it was “a smart deal in that it brings in some higher yielding consumer loan products — a key focus area for [NatWest Group]”.
Shore Capital analyst Gary Greenwood noted: “NatWest is underweight from a market share perspective in unsecured personal lending and credit cards, with this having been previously identified by management as an area for growth.”
