REG - Sainsbury(J) PLC - Sale of Core Banking Business to Natwest Group

J SainsburyAnnouncement

20/06/2024 07:00

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RNS Number : 1999T  Sainsbury(J) PLC  20 June 2024

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 2(nd) March 2024, the Core Banking Business generated
£7 million of adjusted profit before tax(3), 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.

 

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