NatWest swoops on retailer Sainsbury's banking business

A customer uses a self-checkout machine inside a Sainsbury’s supermarket in London

By Sinead Cruise and Sarah Young

LONDON (Reuters) -NatWest has struck a deal to acquire most of the banking business of UK retailer Sainsbury's, the companies said on Thursday, in a deal that would increase the British lender's assets by 2.5 billion pounds ($3.2 billion).

The first major transaction executed by NatWest Chief Executive Paul Thwaite since formally taking charge last year will also boost the bank's customer accounts by about 1 million, in line with its strategy to ramp up retail banking.

The disposal by Sainsbury's mirrors this year's deal by rival supermarket chain Tesco to offload most of its banking activities to Barclays for 600 million pounds.

"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," Thwaite said in a statement.

"NatWest Group has a strong track record of successful integration and we are focused on ensuring a smooth transition for customers."

NatWest shares were up 0.3% at 0706 GMT while Sainsbury's stock gained 2.3% in early trading.

The assets acquired include 1.4 billion pounds in unsecured personal loans, 1.1 billion pounds in credit card balances and about 2.6 billion pounds of customer deposits.

The deal is expected to close in March 2025 and NatWest will receive an additional 125 million pounds payment from Sainsbury's at completion.

Sainsbury's will retain its commission-income businesses, including insurance, ATMs and travel money, which it described as "capital-light and profitable" with a strong connection to its core retail operations.

Argos Financial Services (AFS) is also excluded from the deal, the retailer said, adding that its plans for this business will be announced at a future date.

Sainsbury's expects to return excess capital of at least 250 million pounds to investors after the disposal and its future model for AFS is in place.

"NatWest's scale and financial services expertise will ensure our existing financial services customers continue to be well looked after," said Sainsbury's CEO Simon Roberts, adding that the deal allows his company to focus on growing its core retail business.

This transaction is expected to have a 20 basis point impact on NatWest's core capital ratio.

($1 = 0.7872 pounds)

(Reporting by Sarah Young and Sinead CruiseEditing by Andres Gonzales and David Goodman)