NatWest has struck a deal to buy most of Sainsbury’s banking business, adding 1m customer accounts in the latest wave of consolidation in the sector.
The lender is to take on the bulk of Sainsbury’s Bank assets including its outstanding credit card, unsecured personal loan and savings accounts.
It will acquire £2.5bn of customer assets, including £1.4 bn of unsecured personal loans and £1.1bn of credit card balances. It will also take on £2.6bn of customer deposits. NatWest is to receive a £125m payment from the retailer when the deal completes in the first half of 2025.
Shares in NatWest rose by almost 1% to 314.5p and Sainsbury’s by 2% to 263.4p in early trading on Thursday.
Sainsbury’s Bank had been up for sale since January, when the supermarket group announced it would exit its banking business after 27 years.
The group acted after a strategic review concluded the banking operations could distract from bringing its focus back to its core grocery and retail operations. Sainsbury’s first considered selling the bank during the Covid pandemic and NatWest had been mooted as a potential bidder.
Paul Thwaite, the new chief executive of NatWest, has indicated he will consider acquisitions if they add scale to the business. The acquisition of Sainsbury’s Bank adds additional scale in credit cards for NatWest, which has identified this as a potential area for growth.
The deal comes almost a year after Thwaite’s predecessor, Alison Rose, was forced to quit during a debanking row with the Reform UK leader, Nigel Farage. Thwaite, who previously led NatWest’s business banking division, replaced Rose on an interim basis last July and was formally appointed chief executive in February.
The NatWest deal does not include certain assets such as the commission income business of Sainsbury’s Bank or ATMs, insurance and travel money or Argos Financial Services. It is conditional on certain approvals including by regulators.
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.”
Simon Roberts, the chief executive of Sainsbury’s, said: “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.”
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The deal is the latest in a wave of consolidation among smaller lenders at a time when bank profitability has been bolstered by higher interest rates. This has meant banks’ net interest income has risen as the amount of money they claw in from higher borrowing costs outpaces the sum they pay in interest on deposits.
In recent months, larger lenders have been snapping up smaller rivals. Last month, Coventry building society announced it would buy Co-operative Bank from its hedge-fund owners for £780m to create a mutual with almost 5 million customers and an £89bn balance sheet.
In March, Nationwide, the world’s building society, launched a £2.9bn takeover of Virgin Money.
Barclays also agreed to buy most of Tesco Bank for £700m in February from the UK’s largest supermarket chain, which retained some assets including its insurance and travel money operations.
