Sainsbury’s to retain Edinburgh-based banking arm after saying no to sale

Sainsbury’s is to retain its Edinburgh-based banking arm after deciding against a sale.

Last November, the supermarket giant revealed that more than one potential suitor had approached it about buying Sainsbury's Bank.

The bank, which began more than two decades ago as a joint venture between the retailer and Bank of Scotland before Sainsbury’s took full ownership in 2014, had been the target of “some very preliminary” approaches, bosses said at the time, but stressed that nothing concrete had emerged.

Now, almost a year on, the group told investors: “Whilst the board of Sainsbury's believe that it was in the best interests of shareholders to explore these expressions of interest, it has concluded that these do not offer better value for shareholders than will be realised through retaining Sainsbury's Bank. Accordingly, all such discussions have now ended.

Sainsbury’s Bank began more than two decades ago as a joint venture between the retailer and Bank of Scotland before Sainsbury’s took full ownership in 2014. Picture: Mike Egerton/PA

“We continue to make progress strengthening and simplifying our financial services business in line with our strategy and we remain comfortable with consensus profit forecasts for the division.”

It noted that the current analyst consensus for its financial services business was for an underlying operating profit of £26 million in financial year 2021/22, £43m in FY22/23, and £49m in FY23/24.

The Sainsbury’s banking division has been at the centre of speculation for some time, with a report last year that Royal Bank of Scotland parent NatWest Group was circling.

In last autumn’s statement, and in response to what it called “media speculation”, Sainsbury’s said: “We set out a clear five-year plan for Sainsbury’s Bank at our capital markets day in September 2019 and confirmed this plan as part of our interim results and strategy update on 5 November 2020.

“We are on track to deliver that plan despite the impact of Covid-19 and expect to deliver a profit in the second half of this financial year.

“We have received some very preliminary expressions of interest in the bank, but this does not mean anything will come of these discussions. Our management team remains focused on delivering the plan.”

In August, shares in Sainsbury's leapt following reports that a private equity group was running the rule over the supermarket chain to assess the potential for a takeover swoop.

The FTSE 100 stock, which ranks as the UK's second largest supermarket operator, saw double-digit share price gains in the wake of press reports that US private equity outfit Apollo Global Management had shown initial interest in Sainsbury's.

The speculation was against a backdrop of takeover talks involving rival Morrisons, which has now been acquired by US private equity group Clayton, Dubilier & Rice following a bidding battle.

During the summer, Sainsbury’s revealed that sales were better than expected with almost a fifth of all food now sold through its website, sharply up on pre-pandemic levels.

In the 16 weeks to June 26, sales were up 1.6 per cent compared with the same period a year earlier – which was at the height of the first wave when shelves were stripped bare with panic-buying. City analysts had expected to see a dip in sales.

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