Natwest has agreed to acquire Sainsbury’s core retail banking arm – with the supermarket giant set to pay the lender £125m to take it off its hands.
The firms announced on Thursday that Natwest expected to buy around £2.5bn of gross customer assets from Sainsbury’s, including £1.4bn of unsecured personal loans and £1.1bn of credit card balances. It has also agreed to acquire around £2.6bn of customer deposits.
As part of the deal, Natwest also expects to add roughly one million customer accounts. The transaction is expected to complete in the first half of 2025.
The deal does not include Sainsbury’s Bank’s operational infrastructure and commission income businesses, such as ATMs, insurance and travel money. Argos Financial Services is also not included.
Paul Thwaite, who became Natwest’s permanent chief executive in February, said just earlier this month that the bank was open to making acquisitions if they offered “compelling shareholder value and compelling strategic rationale”.
Sainsbury’s previously announced in January that it would undertake a “phased withdrawal” from its banking business as part of a “food first” strategy launched in 2020, which involves concentrating efforts on its core retail businesses.
The supermarket added that it was “exploring a number of options” for the bank, opening the door to takeover bids.
Natwest’s move comes after Barclays struck a deal to buy most of Tesco Bank for £600m in February, with the mid-sized banking sector seeing increasing M&A activity this year – most notably Nationwide’s agreed £2.9bn acquisition of Virgin Money.
“This transaction is a great opportunity to accelerate the growth of our retail banking business at attractive returns, in line with our strategic priorities,” Thwaite said on Thursday.
“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.”
Simon Roberts, Sainsbury’s CEO, added: “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.”
He continued: “Today’s news means we will focus all our time and resources going forward on growing our core retail business, delivering great quality and value, week in week out.”
There are no immediate changes for Sainsbury’s Bank customers, the firms said.
Over the last two decades, supermarkets have sought to earn more money from their customers beyond food and drink. These ventures have included telecommunications, broadband, restaurants, energy and more.
Sainsbury’s Bank and Tesco Bank both launched in 1997. Sainsbury’s ran its banking business as a joint venture with Bank of Scotland until taking full ownership in 2014.
Sainsbury’s exit from its core retail banking business came after a period of scaling back its operations and speculation that the supermarket was planning to sell the division.
It ceased new mortgage lending in 2019 and formally exited the market when The Co-operative Bank picked up Sainsbury’s mortgage portfolio for £464m last August.