Banking deal

NatWest Group snaps up Sainsbury’s bank assets

Sainsbury's Bank
Sainsbury’s Bank at the Gyle, Edinburgh (pic: Terry Murden / DB Media Services)

Natwest Group, trading as Royal Bank of Scotland north of the border, has agreed to acquire Sainsbury’s retail banking business.

It involves about £2.5 billion of gross customer assets, comprising £1.4bn of unsecured personal loans and £1.1bn of credit cards balances, together with approximately £2.6bn of customer deposits.

Sainsbury’s will pay NatWest £125 million to take on the assets which will add around a million customer accounts to NatWest Group.

The operational infrastructure and commission income businesses of Sainsbury’s Bank, based in Edinburgh, including ATMs, insurance and travel money are not included in this transaction. Argos Financial Services is also not included.

The deal is in line with the strategy set out by NatWest CEO Paul Thwaite at the time of his appointment in February to drive “disciplined growth” within the bank’s customer businesses and to grow through acquisitions if they provide compelling shareholder value and strategic rationale.

It comes amid a flurry of M&A activity in the sector. Barclays agreed in February to buy most of Tesco Bank for £600m, Nationwide is bidding £2.9bn for Virgin Money and Coventry Building Society is acquiring Co-op Bank.

Sainsbury’s moved into banking in 1997 as a joint venture with Lloyds Banking Group, before the grocery group took full ownership of it in 2013.  It has been based at offices at the Gyle in Edinburgh,

It announced in January this year that it would undertake a “phased withdrawal” from its banking business as part of its “food first” strategy launched in 2020, which involves concentrating efforts on the core retail businesses.

Following today’s announcement, Mr Thwaite said: “This transaction is a great opportunity to accelerate the growth of our retail banking business at attractive returns, in line with our strategic priorities.

“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.  NatWest Group has a strong track record of successful integration, and we are focussed on ensuring a smooth transition for customers.”

Simon Roberts, Sainsbury’s CEO, commented: “I am pleased to be announcing this news today. NatWest’s values and customer focus are a close fit with ours and as one of the UK’s leading banks, NatWest’s scale and financial services expertise will ensure our existing financial services customers continue to be well looked after.

“There will be no immediate change for our bank customers as a result of this announcement. Today’s news means we will focus all our time and resources going forward on growing our core retail business.”

This transaction is expected to have a 20 basis point impact on NatWest Group’s CET1 ratio upon completion and be EPS and RoTE accretive upon completion.

Will Howlett, financials analyst at wealth manager Quilter Cheviot, said: ‘This move is indicative of the ongoing consolidation trend within the banking sector, which we have been anticipating. 

“While the scale may be small relative to NatWest’s existing operations, the long-term potential for cross-selling and deepening customer relationships could be significant.”

For Sainsbury’s, Russ Mould, investment director at broker AJ Bell, said ‘”emoving any distractions elsewhere in the business could help to oil the wheels”.

Shares in NatWest closed 8p or 2.56% higher at 320.5p.

Comment: Scotland a bit player in bank’s rebirth



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