NatWest has agreed to buy the majority of the banking operations of UK supermarket Sainsbury’s, the firms announced on Thursday. This transaction would expand the British lender’s capital by 2.5 billion pounds ($3.2 billion).
NatWest Chief Executive Paul Thwaite’s first significant purchase since taking over last year would also increase the bank’s client base by around 1 million.
Sainsbury’s sale resembles this year’s decision by competitor grocery giant Tesco to sell most of its banking assets to Barclays, which opens a new tab for £600 million. This move is in line with its goal to expand retail banking.
In addition to a similar customer base, we expect the transaction to contribute growth to our credit card business and unsecured personal lending. Thwaite stated this in a news release, emphasizing that it aligns with our existing risk appetite.
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“NatWest Group has an outstanding track record of successful mergers and acquisitions and we concentrate on delivering a smooth transition for customers.”
NatWest shares were up 0.3% at 0706 GMT, while Sainsbury’s stock jumped 2.3% in early trade.
The assets bought included 1.4 billion pounds in unsecured personal loans, 1.1 billion pounds in credit card balances, and about 2.6 billion pounds in consumer deposits.
NatWest expects to finalize the transaction in March 2025 and expects Sainsbury’s to pay an additional 125 million pounds upon completion.
Sainsbury’s will keep its commission-based businesses, such as insurance, ATMs, and travel money, which it describes as “capital-light and profitable” with a strong link to its core retail activities.
The firm also left Argos Financial Services (AFS) from the sale, stating that its plans for this business will be communicated at a later date.
Sainsbury’s aims to return surplus capital of at least 250 million pounds to shareholders once its divestment is complete and its successor model for AFS is in place.
Sainsbury’s CEO Simon Roberts said, ‘We will ensure that our current financial services customers continue to receive high-quality service, thanks to NatWest’s scale and financial capabilities. He explained that the purchase enables us to concentrate on growing our core retail business.
NatWest’s core capital ratio is estimated to be affected by 20 basis points due to the deal.
