J Sainsbury to Sell Core Banking Business to NatWest Group — Update

By Ian Walker

J Sainsbury is selling its core banking business to NatWest Group for an undisclosed sum, as part of its previously announced plan to withdraw from the segment and focus on its retail business.

The U.K.'s second-largest grocer by market share said Thursday that the final consideration will reflect the value of assets and liabilities to be transferred to NatWest at completion. It expects to write down a net 45 million pounds ($57.2 million) on the business' assets and liabilities.

Sainsbury said the bank will return GBP250 million of excess capital back to the company, which it will then return to shareholders. It didn't say how this will happen.

The grocer said the sale excludes the bank's commission-income businesses, including insurance, ATMs and travel money, which are capital-light profitable businesses with a strong connection to its core retail offer.

The sale also excludes Argos Financial Services, which Sainsbury said it will update its plans for at a later date.

"Today's news means we will focus all our time and resources going forward on growing our core retail business," Sainsbury Chief Executive Simon Roberts said.

Separately, NatWest confirmed it was buying the business, which had GBP2.5 billion in gross customer assets as of March 31 and one million customer accounts.

It said the acquisition will add 20 basis point to its core CET1 ratio, a key measure of balance-sheet strength that calculates capital against risk-weighed assets, upon completion.

The transaction is expected to close in the first half of next year.

Sainsbury's bank generated GBP7 million of adjusted pretax profit for the year ended March 2.

Sainsbury shares at 0734 GMT were up 3.60 pence, or 1.4%, at 263.20 pence, but are down 13% over the year to date. NatWest shares are up 2.50 pence, or 0.8%, at 315.0 pence, and are up 43.6% over the year to date.

Write to Ian Walker at ian.walker@wsj.com

(END) Dow Jones Newswires

June 20, 2024 04:11 ET (08:11 GMT)

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