It has agreed to buy the banking arm of Sainsbury’s NatWest Group because the British bank is trying to get a bigger piece of the “pie” in the retail banking market.
Britain’s second-largest department store chain will pay NatWest 125 million pounds ($159 million) in a deal, the companies announced Thursday.
The deal will allow NatWest to focus on its finance business, which includes £2.5bn of unsecured personal loans and credit cards and £2.6bn of customer deposits.
“NatWest is underperforming in terms of market share in unsecured personal loans and credit cards, while this has been identified by management as a growth area,” said Shore Capital analyst Gary Greenwood.
Therefore, the transaction is in line with the group’s strategic objectives.
For Sainsbury’sthe deal comes just months after it announced plans to cut £1bn of operating costs and buy back shares as part of a renewed strategy to focus on food sales.
The company said it will focus on selling food, rather than clothing or other products, to give customers access to the widest possible range of supermarket products.
For this purpose, the banking department began to be “phased out” in January.
A deal has been on the cards for London-based Sainsbury’s for some time since it agreed to sell its £500m mortgage portfolio to the Co-operative Bank last year.
The move follows a deal by Barclays, which agreed in February to buy most of Tesco’s banking business, which competes with Sainsbury’s, for around £600m.
Sainsbury’s deal with NatWest is expected to close in the first half of 2025 and is subject to regulatory approvals.
Paul Thwaite, the bank’s chief executive, described the deal as “an excellent opportunity to accelerate the growth of our retail banking business with attractive returns in line with our strategic priorities”.
