Taxpayer-backed NatWest among initial suitors for Sainsbury’s Bank
Written by Rother Radio News on 12/11/2020
NatWest Group is among a pack of suitors circling Sainsbury’s Bank as it mulls its most significant corporate acquisition since its £45bn government bailout more than a decade ago.
Sky News has learnt that NatWest, which changed its name from Royal Bank of Scotland (RBS) earlier this year, has requested information from Sainsbury’s about its banking business in recent weeks.
City sources said that NatWest’s interest was “extremely preliminary” and might not lead to a formal offer for partial or full control of the business.
The supermarket operator said last week that it was reviewing options for Sainsbury’s Bank after receiving a number of approaches about a deal, confirming a report by Sky News.
It did not name the parties which had approached it.
Analysts believe a large high street lender would be the logical buyer of Sainsbury’s Bank because of the size and financial profile of the business.
Until 2013, the division operated as a joint venture between Sainsbury’s and Lloyds Banking Group, with the grocer paying £260m to take full control of it.
If NatWest did pursue a deal for either a minority or controlling stake in Sainsbury’s Bank, it would be by far the most significant acquisition made by the company since its 2008 rescue.
For much of the period since then, NatWest has been barred from paying dividends and making acquisitions, although the shackles on it have been loosened considerably in the last five years.
Sources said that other big high street banks had also been in touch with Sainsbury’s in recent months about buying part or all of its banking arm.
Simon Roberts, Sainsbury’s new chief executive, has outlined a five-year plan to double returns from the bank, which like the rest of the industry has been hampered by ultra-low interest rates.
Sainsbury’s Bank has more than 2 million customers across a range of products including mortgages, home insurance and credit cards.
UBS, the investment bank, is advising Mr Roberts.
Sainsbury’s put a deal to sell its £1.9bn mortgage book to Nationwide, the UK’s largest building society, on hold after the coronavirus pandemic struck, and has said it will not inject further capital into Sainsbury’s Bank.
The grocer launched its financial services business in 1997, with the promise of targeting customers through data gleaned from customer loyalty schemes stoking expectations that it could become a major profit engine for the group.
Despite taking full ownership of the Nectar loyalty programme, however, that potential has never been fully realised.
Sainsbury’s also owns the Argos Financial Services business following its takeover of the general merchandise retailer in 2016.
Tesco and the Co-op Group have also built a presence in the banking market, with the latter’s business almost collapsing twice in the last decade.
Britain’s biggest retailer, meanwhile, has also pulled out of the mortgage market, selling its £3.8bn book to Lloyds last year.
Last year, Sainsbury’s brought in Jim Brown, a heavyweight former Royal Bank of Scotland executive, to run its banking arm.
NatWest and Sainsbury’s declined to comment.
© Sky News 2020