Sainsbury’s backs bank with £100m, hires chairman

SUPERMARKET giant Sainsbury’s has splashed out £245 million to take full control from Lloyds Banking Group of the banking joint venture it set up with Bank of Scotland 16 years ago.

Sainsbury's have taken full control of the bank which bears their name. Picture: Contributed

It said it will inject £100m into the fully-owned bank over three years to beef up its capital cushions and revealed that the chairman will be Roger Davis, a former chief executive of UK Banking at Barclays.

Picking up the 50 per cent the food retailer did not already own, Sainsbury’s chief executive Justin King said: “This is an exciting transaction for Sainsbury’s which has the potential to deliver significant benefits.”

The bank has delivered five successive years of profit growth, with profit before tax in 2012-13, announced yesterday, of £59m, against £42m in the previous 12 months.

John Rogers, Sainsbury’s chief financial officer, said the HQ of Sainsbury’s Bank would remain in Edinburgh, where 300 are currently employed plus another 30 in London.

A Sainsbury’s Bank spokesman said the bank had grown staff numbers by around 20 per cent last year, and expected similar growth – suggesting over 60 jobs – this year. She said that, in addition, more than 200 Fife-based staff in Lloyds, which took over HBOS in 2008, would transfer to Sainsbury’s Bank over the next three years.

Rogers said: “We hope over time to create jobs in the Scottish economy.” As part of the takeover, Sainsbury’s Bank will set up its own banking platform.

Rogers said that Sainsbury’s Bank did not expect the same problems faced by rival Tesco in recent years after the latter bought out Royal Bank of Scotland from a similar joint venture.

Rogers cited the fact that Tesco Bank has faced the complication of attempting to launch current accounts and mortgages. Sainsbury’s Bank has no current plans to do this, focusing instead on credit cards, loans, savings and insurance products.

The bank will be run by chief executive Peter Griffiths who joined last November from Principality, Wales’ largest building society.

Lady Susan Rice, managing director of Lloyds Banking Group Scotland, is also joining the board as a non-executive director.

David Tyler, Sainsbury’s chairman, said: “Her career in retail banking is particularly relevant in light of today’s announcement of the agreement to take full ownership of Sainsbury’s Bank.”

The grocery major announced a 6 per cent rise in annual group underlying pre-tax profits to £756m on sales up 4.6 per cent at £25.6 billion.

It said like-for-like sales rose a market-beating 1.8 per cent in the year to 16 March, with the full-year divi rising 3.7 per cent to 16.7p via an 11.9p final payment (11.6p).

King said that this year Sainsbury’s would pass a milestone of having more convenience stores than bigger supermarket outlets. Currently, it has 523 Sainsbury Locals and 583 traditional stores, but like its rivals it has been opening convenience stores at a far faster rate.

King, who became chief executive in 2004, sidestepped speculation that he might be contemplating stepping down at the company, saying he was absolutely committed to the business and that it had lots of potential still to fulfil.

However, at a London news conference for yesterday’s results, he declined to formally say whether he would be presenting Sainsbury’s results as chief executive in a year’s time.