NatWest has struck a deal to acquire most of Sainsburys’ banking business in a deal that will increase the lender’s assets by £2.5 billion, the companies said on Thursday.
This is the first major transaction NatWest has undertaken since chief executive Paul Thwaite formally took charge last year.
The transaction will also boost NatWest’s customer accounts by about £1 million, in line with its strategy to ramp up retail banking.
The move by Britain’s number two supermarket chain Sainsbury’s mirrors a deal by market leader Tesco earlier this year.
Tesco offloaded most of its banking activities to Barclays in a deal worth £600 million.
Thwaite said in a statement, “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 focused on ensuring a smooth transition for customers.”
In early trading, NatWest’s shares were up 0.3% and Sainsbury’s gained 2.3%.
The Deal
The assets acquired include £1.4 billion in unsecured personal loans, £1.1 billion in credit card balances and about £2.6 billion of customer deposits.
Sainsbury’s will retain its commission-income businesses, including insurance, ATMs and travel money.
It described these businesses as ‘capital-light and profitable’ with a strong connection to its core retail operations.
The retailer also said that it was excluding Argos Financial Services (AFS) from the deal, and that it will announce its plans for the business at another time.
Sainsbury’s expects to return excess capital of at least £250 million to investors after the disposal and its future model for AFS is in place.
The retailer’s chief executive Simon Roberts said, “NatWest’s scale and financial services expertise will ensure our existing financial services customers continue to be well looked after.”
Roberts added that the deal allows Sainsbury’s to focus on growing its core retail business.
The transaction is expected to have a 20 basis point impact on NatWest’s core capital ratio.
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