UK-based supermarket giant Sainsbury’s is reportedly exploring the sale of its 23-year old banking business.
J Sainsbury CEO Simon Roberts is plotting the sale of Sainsbury’s Bank as a low-interest-rate environment is impacting its business continuity, Sky News reported.
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Mid-sized lenders in the country are struck with depressed margins, resulting from near-zero interest rates and price competition among each other.
As a result, the supermarket chain is looking for potential buyers to acquire its banking unit.
Initially, Sainsbury’s proposed a £1.9bn sale of its mortgage book to British financial institution Nationwide Building Society, the report added.
However, the deal was put on hold after the Covid-19 pandemic began. Nationwide said that it will not inject more capital into the bank.
Additionally, Sainsbury’s is considering selling stakes in the bank to a high street lender, instead of exiting the banking business entirely.
Sainsbury’s Bank was a joint venture between Sainsbury’s and Lloyds Banking Group (LBG).
In 2013, the grocer acquired a 50% stake and took full control of the bank by paying £260m to LBG.
Moreover, following its acquisition of the general merchandise retailer in 2016, Sainsbury’s also owns Argos Financial Services.
Last year, Sainsbury’s pledged to simplify its banking business by reducing the cost and income ratio by 50% within five years.
Sainsbury’s Bank has over two million customers across mortgage, home insurance, and credit cards, among others.
Britain’s other retail giants such as Tesco and the Co-op Group have also forayed into the banking industry.
However, the Co-op Group offloaded its mortgage loan book worth £3.8bn to LBG last year, the Sky News report added.
