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Sainsbury’s in talks to sell bank arm to Centerbridge

Sainsbury's Bank hq

Sainsbury’s Bank is headquartered at the Gyle in Edinburgh

Sainsbury’s in talks to offload its Edinburgh-based banking arm to US private equity group Centerbridge Partners, it has been reported.

A deal could be worth about £200 million and would end months of speculation that has linked the business with a number of potential suitors including NatWest (RBS) Group.

The supermarket chain kicked off an auction of the division a year ago and a sale would follow Tesco’s scaling back its banking interests. Tesco Bank, also based in Edinburgh, sold its mortgage book and recently announced that it was pulling out of the current account market.

Sainsbury’s Bank has about two million customers, offering home insurance and credit cards. A sale could be concluded within weeks, according to Sky News.

The grocer, which is said to be facing its own potential bid from a private equity group, pulled out of the mortgage market in 2019 because of the impact of ultra-low interest rates on the profitability of smaller lenders.

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Centerbridge previously backed Aldermore, the mid-sized lender, and was part of a consortium in 2015 which tried to acquire Williams & Glyn, a branch network that Royal Bank of Scotland -–now NatWest Group – was ordered to sell under European state aid rules.

That project failed but the executive who was brought in to head up Williams & Glyn – Jim Brown – is now CEO of Sainsbury’s Bank.

It is thought Centerbridge wants to use Sainsbury’s Bank as a platform to buy other banking operations in the UK.

The proposed deal is said to include allowing Centerbridge to use the Sainsbury’s brand under a licensing agreement.

Sainsbury’s, launched its banking division in 1997, pre-dating the banking crash by 10 years. It took full control in 2013 when it paid £260m to buy a 50% shareholding from joint venture partner Lloyds Banking Group as it attempted to become a “challenger” to the high street banks.

It now says it will not inject further capital into its banking arm.

Sainsbury’s is being advised on the bank talks by UBS.

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