20 June 2024
SALE OF CORE BANKING BUSINESS
TO NATWEST GROUP
Further to its announcement on 18
January 2024 regarding a phased withdrawal from its core banking
business, J Sainsbury PLC ("Sainsbury's") is pleased to announce
that it has entered into an agreement for the sale of Sainsbury's
Bank plc's ("Sainsbury's
Bank") personal loan, credit card and retail deposit
portfolios (together the "Core
Banking Business") to NatWest Group ("NatWest"),
one of the UK's leading banks (the "Transaction"). We expect the
Transaction to complete in the first half of calendar year
2025.
This Transaction does not include
Sainsbury's Bank's commission income businesses, including
insurance, ATMs and travel money. These are capital-light and
profitable businesses with a strong connection to Sainsbury's core
retail offer.
Argos Financial Services
("AFS") is also not
included in the Transaction. A further update on Sainsbury's plans
for this business will be provided at a future date.
We expect Sainsbury's Bank to return
excess capital of at least £250 million to Sainsbury's once the
phased withdrawal from its Core Banking Business has been completed
and the future model for Argos Financial Services is in place.
Sainsbury's intends to return this capital to
shareholders.
Core Banking Business customers are
expected to transfer to NatWest in the first half of calendar year
2025. Sainsbury's Bank customers do not need to take any action as
a result of this announcement. Further information relating to the
transfer of the Core Banking Business to NatWest pursuant to Part
VII of the UK Financial Services and Markets Act 2000 will be sent
in due course.
There will be no immediate changes to
Sainsbury's Bank customers' existing terms and
conditions.
Simon Roberts, Sainsbury's CEO said:
"I am pleased to be announcing this
news today. NatWest's values and customer focus are a close fit
with ours and as one of the UK's leading banks, NatWest's scale and
financial services expertise will ensure our existing financial
services customers continue to be well looked after. There will be
no immediate change for our bank customers as a result of this
announcement. Today's 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."
Paul
Thwaite, NatWest Group CEO said:
"Following today's announcement, we
look forward to welcoming new customers to NatWest Group, where
they will benefit from our expertise and award-winning digital
banking offering. 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
within existing risk appetite. NatWest Group has a strong
track record of successful integration, and we are focussed on
ensuring a smooth transition for customers."
Enquiries
Investor Relations
Media
James
Collins
Rebecca Reilly
+44 (0) 7801 813
074
+44 (0) 20 7695 7295
Additional information
Under the terms of the Transaction,
Sainsbury's Bank is expected to transfer a portfolio of
capital-intensive assets and financial liabilities from the
Sainsbury's Bank balance sheet to NatWest, at an agreed £125
million discount to the balances of the assets and liabilities
being transferred. Taking into account £80 million of net
provisions already recognised on the asset portfolios being sold,
we expect the Transaction to result in a one-off write down on the
net book value of the asset and liabilities being sold of
approximately £45 million, excluding transaction costs. The final
consideration will reflect the value of assets and liabilities
transferred at completion of the Transaction and will be subject to
certain customary adjustments.1,2
The transaction will be effected
through a banking business transfer under Part VII of the Financial
Services and Markets Act 2000, as is typical in the transfer of UK
banking businesses. Completion is conditional on court sanction and
regulatory approval or non-objection. Prior to completion,
customary arrangements are due to be finalised, including a
transitional services agreement. Completion is expected to occur
during the first half of calendar year 2025.
For the 52 weeks ended 2nd
March 2024, the Core Banking Business generated £7 million of
adjusted profit before tax3, in an environment where
funding costs continued to rise. There is no change to the
previously announced guidance for the expected trading profit for
the Financial Services Division of between break even and £15
million for FY24/25.
Robert Mulhall, Chief Executive
Officer, Sainsbury's Bank, and Mike Larkin, Chief Financial
Officer, Sainsbury's Bank are each individuals who are deemed to be
important to the Core Banking Business. Each of these individuals
are expected to remain with Sainsbury's Group post-completion and
will support Sainsbury's Group with the orderly wind-down /
transfer of the remaining Sainsbury's Bank PLC businesses and
operations.
Footnotes
1
As at 31 March 2024, the gross asset value of the assets of the
portfolio subject to the Transaction was approximately £3.7
billion, comprising of unsecured personal loans and credit cards
balances. The value of the financial liabilities was approximately
£4.0 billion, which comprises of customer deposits.
2
As at 31 March 2025, the gross asset value of the assets of the
portfolio subject to the Transaction is expected to be
approximately £2.5 billion, comprising of unsecured personal loans
and credit cards balances. The value of the financial liabilities
is expected to be approximately £2.6 billion, which comprises
customer deposits.
3
Adjusted profit before tax for the Core Banking
Business is a non-statutory measure which reflects the profits
attributable to the assets that are the subject of the Transaction
after deducting all charges except taxation, including an
allocation of central overheads and funding costs. Adjusted profit
before tax for the Core Banking Business excludes one-off costs
associated with the Core Banking Business.
Forward looking statements
This document contains statements
which are, or may be deemed to be, "forward looking statements"
which are prospective in nature. All statements other than
statements of historical fact are forward‐looking statements. They
are based on current expectations and projections about future
events, and are therefore subject to risks and uncertainties which
could cause actual results to differ materially from the future
results expressed or implied by the forward‐looking statements.
Often, but not always, forward looking statements can be identified
by the use of forward looking words such as "plans", "expects", "is
expected", "is subject to", "budget", "scheduled", "estimates",
"forecasts", "intends", "anticipates", "believes", "targets",
"aims", "projects" or words or terms of similar substance or the
negative thereof, are forward‐looking statements, as well as
variations of such words and phrases or statements that certain
actions, events or results "may", "could", "should", "would",
"might" or "will" be taken, occur or be achieved. Such statements
are qualified in their entirety by the inherent risks and
uncertainties surrounding future expectations. Forward‐looking
statements include statements relating to (a) future capital
expenditures, expenses, revenues, earnings, economic performance,
indebtedness, financial condition, dividend policy, losses and
future prospects, (b) business and management strategies and the
expansion and growth of Sainsbury's operations, and (c) the effects
of global economic conditions on Sainsbury's business.
Such forward‐looking statements
involve known and unknown risks and uncertainties that could
significantly affect expected results and are based on certain key
assumptions. Many factors may cause actual results, performance or
achievements of Sainsbury's to be materially different from any
future results, performance or achievements expressed or implied by
the forward looking statements. Important factors that could cause
actual results, performance or achievements of Sainsbury's to
differ materially from the expectations of Sainsbury's, include,
among other things, general business and economic conditions
globally, industry trends, competition, changes in government and
other regulation and policy, including in relation to the
environment, health and safety and taxation, labour relations and
work stoppages, interest rates and currency fluctuations, changes
in its business strategy, political and economic uncertainty and
other factors. Such forward‐looking statements should therefore be
construed in light of such factors. Neither Sainsbury's nor any of
its directors, officers or advisers provides any representation,
assurance or guarantee that the occurrence of the events expressed
or implied in any forward‐looking statements in this document will
actually occur. You are cautioned not to place undue reliance on
these forward‐looking statements, which speak only as of the date
hereof. Other than in accordance with its legal or regulatory
obligations (including under the UK Listing Rules and the
Disclosure and Transparency Rules), Sainsbury's is not under any
obligation and Sainsbury's expressly disclaims any intention or
obligation to update or revise any forward‐looking statements,
whether as a result of new information, future events or
otherwise.
The release, publication or
distribution of this announcement in jurisdictions other than the
United Kingdom may be restricted by law and therefore any persons
who are subject to the laws of any jurisdiction other than the
United Kingdom should inform themselves about, and observe, any
applicable requirements. This announcement has been prepared for
the purposes of complying with the UK Listing Rules and the
information disclosed may not be the same as that which would have
been disclosed if this announcement had been prepared in accordance
with laws and regulations of any jurisdiction outside of
England.
Cautionary Statements
This announcement is not intended to,
and does not constitute, or form part of, any offer to sell or an
invitation to purchase or subscribe for any securities or a
solicitation of any vote or approval in any
jurisdiction.
Important information relating to advisers
UBS Investment Bank is acting as sole
financial adviser to Sainsbury's. Linklaters LLP is acting as legal
adviser to Sainsbury's.
UBS AG London Branch is authorised
and regulated by the Financial Market Supervisory Authority in
Switzerland. It is authorised by the Prudential Regulation
Authority and subject to regulation by the Financial Conduct
Authority and limited regulation by the Prudential Regulation
Authority in the United Kingdom. UBS AG London Branch is
acting exclusively as sole financial adviser to Sainsbury's and no
one else in connection with the Transaction. In connection with
such matters, UBS AG London Branch will not regard any other person
as its client, nor will it be responsible to any other person for
providing the protections afforded to its clients or for providing
advice in relation to the Transaction, the contents of this RNS
Announcement or any other matter referred to herein.