Sainsbury's will PAY NatWest £125m to take on the bulk of its banking arm

Sainsbury’s has struck a deal to sell the bulk of its banking assets to NatWest in a move that will see the lender take on around another million customer accounts.

The supermarket giant will pay NatWest £125million upon completion of the deal, which will see the lender acquire £1.4billion of unsecured personal loans, £1.1billion of credit card balances and approximately £2.6billion of customer deposits.

It will see NatWest take on Sainsbury's core banking assets and liabilities, although the final consideration will be confirmed when the deal is expected to be completed in March next year.

Sainsbury's said there would be no immediate changes to its banking customers’ terms and conditions, adding they 'do not need to take any action'.

Simon Roberts, chief executive of Sainsbury’s, said: 'Today’s news means we will focus all our time and resources going forward on growing our core retail business'

It comes after Sainsbury’s announced in January it was winding down its banking division to focus on its retail operations.

Sainsbury’s said it expects to return at least £250million in excess capital to shareholders after the deal.

Rival Tesco offloaded most of its banking activities to Barclays in a £600million deal earlier this year.

The sale does not include Sainsbury’s Bank’s commission income businesses, such as insurance, cash points and travel money.

Argos Financial Services is also not included in the deal.

Simon Roberts, chief executive of Sainsbury’s, said: 'Today’s news means we will focus all our time and resources going forward on growing our core retail business.'

It marks the first major deal under NatWest boss Paul Thwaite, who joined last year.

Thwaite said: 'This transaction is a great opportunity to accelerate the growth of our retail banking business at attractive returns, in line with our strategic priorities.

'As well as a complementary customer base, the transaction is expected to add scale to our credit card and unsecured personal lending business.'

In a stock market statement, Sainsbury's said: 'Forecast balance sheet and account values disclosed are at completion which is assumed to be 31 March 2025.

'Under the terms of the transaction, the gross customer assets and liabilities and associated cash at completion will transfer to NatWest Group and an agreed £125M consideration will be payable from Sainsbury's Bank to NatWest Group.'

Deal: Sainsbury’s has struck a deal to sell the majority of its banking arm to NatWest

On 31 March, the gross asset value of the assets of the portfolio subject to the transaction came in at £3.7billion.

Rival Tesco offloaded most of its banking activities to Barclays in a £600million deal earlier this year.

Sainsbury's shares rose 1.54 per cent or 4.00p to 263.60p on Thursday, while NatWest shares were up 0.61 per cent or 1.90p to 314.40p.

Richard Hunter, head of markets at Interactive Investor, said: 'The announcement that Sainsbury would be selling its core banking business to NatWest was warmly received, with the shares rising by more than 2 per cent.

'The move was previously trailed, but nonetheless represents a back to basics attitude whereby the supermarket can focus on its core offering rather than subsidiary operations.

'The move is also similar to the recent agreement between Tesco and Barclays, whereby some capital light income businesses will be retained, such as insurance and travel money services.'