One of the leading supermarket chains in the United Kingdom, Sainsbury, has made a deal with British bank NatWest.
The leading bank will acquire the supermarket giant’s banking division in a deal that will reach completion in 2025.
The Sale
According to Sainsbury, there is no action needed on behalf of customers even after the acquisition is complete.
This news comes after Tesco, one of Sainsbury’s competitors, also agreed to sell its banking division to Barclays.
NatWest will take over about 1 million customer accounts from Sainsbury in the said deal. It would also take on unsecured personal loans worth $1.77 billion and credit card balances worth $1.4 billion.
Likewise, it will take on customer deposits worth $3.3 billion.
Sainsbury announced that the acquisition would be complete in the first half of the coming year. It also added that its terms and conditions will not see any immediate change.
At the time of completion, Sainsbury will also make a payment to NatWest worth $158 million. The acquisition is not completely unexpected.
This is due to the fact that Sainsbury had announced earlier this year that it would wind down its banking division and offer financial products via third parties instead.
The Impact
NatWest will now manage the banking activity. This would enable the supermarket giant to focus more on its business’ retail aspect.
Sainsbury’s CEO, Simon Roberts, said that going forward, their focus would be on growing their core retail business to deliver great value and quality.
The deal will see NatWest’s assets increase by $3.2 billion. It is in line with the bank’s mission to expand its retail banking business.
The acquisition of 1 million customers is also expected to help. It is the first major transaction that NatWest’s C’O Paul Thwaite has made after he took on the position last year.
He said that the transaction was in line with the bank’s strategic priorities, as it would help in accelerating the growth of their retail banking business.
The Opportunities
The chief executive said that the transaction would not just help in expanding their customer base, but also open up other opportunities.
It would help NatWest in scaling its unsecured personal loan and credit card business without going beyond their risk appetite.
He added that the bank has a proven track record when it comes to successful integration. Therefore, they would ensure that customers can make the transition smoothly.
It should be noted that the deal does not expand to the commission income business of Sainsbury’s Bank.
This includes travel money, cash points and insurance. The acquisition package does not include Argos Financial Services.
After the deal, Sainsbury will return excess capital worth $317 million to its investors. Meanwhile, NatWest’s core capital ratio will see an impact of 20 basis points.
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