What’s next for Sainsbury’s bank customers as it pays NatWest £125m to offload it

NatWest is to take over most of the banking business of supermarket Sainsbury’s in a deal that will boost its assets by £2.5bn and add nearly a million new customers.

The bank will acquire the supermarket’s £1.1bn credit card business, £2.6bn savings accounts as well as £1.4bn of personal loans

Sainsbury’s said it is retaining its cash machines, insurance and travel money businesses and keeping its brand. The deal will see Sainsbury’s pay NatWest £125m to take over its bank’s £4bn liabilities.

Argos Financial Services, which has more than two million customers, is not part of the deal. Sainsbury’s said its plans for its Argos business will be announced at a future date.

Customers will see no immediate change as a result of the deal, Sainsbury’s said, and “do not need to take any action”.

The supermarket said in January it planned to wind down its banking division, which made pre-tax profits of £7m last year, to focus on its food business. The deal mirrors a similar deal by rivals Tesco which sold most of its banking operation to Barclays for £600m earlier this year.

Simon Roberts, Sainsbury’s chief executive, said NatWest’s scale and financial services expertise “will ensure our existing financial services customers continue to be well looked after”.

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“The news means we will focus all our time and resources going forward on growing our core retail business, delivering great quality and value, week in week out.”

NatWest boss Paul Thwaite said the deal with boost its customer accounts by about one million as part of a plan to ramp up its retail banking business.

“As well as a complementary customer base, the transaction is expected to add scale to our credit card and unsecured personal lending business within existing risk appetite,” he said.

“NatWest Group has a strong track record of successful integration and we are focused on ensuring a smooth transition for customers.”

It is not known how many jobs might be lost as a result of the transfer, which is expected to be finalised next year. Sainsbury’s said it would seek to redeploy affected employees.

Sainsbury’s said bank chief executive, Robert Mulhall, and its finance chief, Mike Larkin, are expected to remain with Sainsbury’s after the deal is done.

The move is part of a retreat by supermarkets from efforts to attract extra revenue from their customers over and above groceries. These have included mortgages, energy deals and mobile phones. Sainsbury’s ended new mortgage lending in 2019 and sold that business to the Co-operative Bank for £464m last year.

Richard Hunter, analyst at interactive investor, said: “The move represents a back to basics attitude whereby the supermarket can focus on its core offering rather than subsidiary operations.”

Will Howlett, at Quilter Cheviot, said: “The acquisition allows NatWest to diversify its offerings and tap into Sainsbury’s established customer base, potentially leading to a more integrated financial services model within the retail space.

“While the scale may be small relative to NatWest’s existing operations, the long-term potential for cross-selling and deepening customer relationships could be significant.”