Sainsbury’s Keeping Bank, Cancels Sale

Sainsbury’s has decided to end talks over the potential sale of Sainsbury’s bank, after talks with potential buyers didn’t lead to a suitable offer.

The supermarket giant — the second largest in the UK — had been looking to sell off its banking operations after it first received some expressions of interest in November 2020.

However, after no offers were made that were seen to be good value to shareholders, the bank has formally ended all talks with those parties.

Domestic and international interest ended

Sainsbury’s bank has around 2 million customers and offers a range of products including credit cards and home insurance.

There were two main parties interested in purchasing the bank from Sainsbury’s. One of these was NatWest, the high street banking group in the UK. The rival was an American private equity group called Centerbridge Partners.

While the board of Sainsbury’s believe that it was in the best interests of shareholders to explore these expressions of interest, it has concluded that these do not offer better value for shareholders than will be realised through retaining Sainsbury’s Bank. Accordingly, all such discussions have now ended.

Company spokesman

The supermarket group has now said that it will focus on simplifying its banking operation that it “remains comfortable” that the banking operation will be profitable.

The group said that the bank was on track to make operating profits of £26 million in this financial year, which should then grow to £43 million in 2022/23 and then £49 million the year after.

Sainsbury’s Bank was first opened in 1997 as a joint venture with Bank of Scotland, which has since joined the Lloyds Banking Group. In 2013, Sainsbury’s decided to take full ownership of the banking operations, paying £260 million for the remaining stake in the business.

Sainsbury’s forecasting more success than others?

Sainsbury’s announcement that it was ending discussions over the sale of the bank, and declaring confidence in its profitability over the next couple of years, is in stark contrast to some of the other similar-sized banks in the UK over the last two years.

Indeed Tesco, the UK’s largest supermarket and the closest direct rival to Sainsbury’s, first sold its mortgage portfolio to the Lloyds group back in 2019, and then this year announced it was closing all current accounts of customers.

M&S Bank is another victim of the financial downturn over the last couple of years. It closed its branches in July 2021, and then all current accounts at the end of August. The financial operation of the business is still running but limited to insurance, credit cards and loans now, as well as travel money — the only in-store service still available.

And many of the larger banks, while keeping services available, are shutting branches at an almost alarming rate. The latest announcement came from the Lloyds Banking Group this week, which revealed another 48 branches are to close, on top of the 44 already announced earlier this year.