Sainsbury’s Bank mortgages on cards

Banking is Sainsbury's 'best-kept secret', says chief executive Peter Griffiths. Picture: Toby Williams
Banking is Sainsbury's 'best-kept secret', says chief executive Peter Griffiths. Picture: Toby Williams
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SAINSBURY’S Bank is accelerating its job creation plans and looking to follow Tesco Bank by moving into mortgages.

Chief executive Peter Griffiths said the payroll at the Edinburgh-based bank would rise this year from 400 to 480 and that its move across the Gyle business park to Lochside would take place earlier than planned.

The bank has kept a fairly low profile in recent years, but following its formal separation from joint venture partner Lloyds, it is now investing in a new IT platform, staff and marketing. The new jobs will be in technology, risk, treasury, compliance and audit and will replace many of those displaced by the ending of the agreement with Lloyds.

Sainsbury’s Bank has a healthy 12.5 per cent capital cushion, well within European guidelines, and is now keen to speed up its growth plans. Its 1.5 million accounts represent just 5 per cent, or one in 20, of the group’s 23 million customers. Achieving Tesco Bank’s 12 per cent penetration would mean trebling the size of its business.

But recent data also shows that only 22 per cent of its customers are aware that Sainsbury’s has a bank.

“It is Sainsbury’s best-kept secret,” said Griffiths, hired in November 2012 from Principality, Wales’s largest building society where he held the same position. He said that “raising awareness” was his biggest test.

Griffiths said he does not see Sainsbury’s as a so-called “challenger” bank to the big four, believing that they occupy different areas of the market and he accepts that the vast majority of those who have bought a product from Sainsbury’s will have their main account with another bank. There is no plan to follow Tesco by launching a current account.

However, it is possible that Sainsbury’s will move into mortgages. “Mortgages are natural bedfellows for us at some stage,” he said, noting that the bank has £3.5 billion on deposit.

“We have to do something with the savings we have,” he said, “and mortgages become an attractive option.”

Sainsbury’s announced last year that it would invest £200m in its IT transition project over the next three to four years as it moved platform.

During that time, the headline cost-income ratio is likely to rise from a healthy 56 per cent to take account of this extra cost, though it will begin to fall if the business continues to grow at its current 8 per cent per year.

Griffiths said the bank would be effectively an online operation, though methods of distribution were being considered.

“It begs questions about the role of the stores,” he said.

“I am agnostic about whether we have a sales proposition in the stores. I am not sure how many people would go into a store looking for a banking product.”

Sainsbury’s does, however, have 138 travel bureaus in stores providing currency transactions and these could be expanded to handle banking products.