NatWest has swooped on Sainsbury’s banking assets in one of the bank’s most notable acquisitions in UK retail banking since the financial crisis.
Sainsbury’s had previously announced it was seeking to streamline its business by restructuring its financial services business, so today’s announcement makes a lot of sense for both parties.
Sainsbury’s will retain its Argos Financial Services, which isn’t included in the deal. Once the transition is finalised, the transaction is expected to return capital of £250m to Sainsbury’s.
“The decision to phase out these operations isn’t a surprise, but shows the grocer’s willingness to grasp the nettle and refocus on its core business,” said Sophie Lund-Yates, lead equity analyst, Hargreaves Lansdown.
“Competition in the supermarket space is fierce and remaining competitive is a very expensive undertaking, and one Sainsbury’s has fared better at than feared. Other finance assets, including ATMs and travel money are remaining in Sainsbury’s fold, as their capital light and profitable models remain attractive to the group.
“Around £2.5bn of assets are making their way to NatWest, via credit cards and unsecured lending. The change shouldn’t make too much difference to existing customers, and from NatWest’s perspective, the deal makes a lot of sense, but is unlikely to markedly move the dial.”