Sainsbury’s has confirmed plans to wind down its Edinburgh-based banking division, as it focuses on its core food business.
The supermarket chain stated it will follow a “phased withdrawal” from banking – although no timeframe was given – but that the service’s 1.9 million customers would see no immediate changes.
Sainsbury’s Bank currently offers loans, credit cards and savings accounts.
Following a strategic review, these products will now be offered by “dedicated providers through a distributed model”, much like it already does this with insurance products.
Chief executive Simon Roberts said: “We have been clear since we launched our food first strategy in 2020 that we would concentrate our efforts on our core retail businesses and today’s announcement reflects that strategic focus..
“It’s business as usual for now at Sainsbury’s Bank and there will be no immediate changes to products and services as a result of today’s announcement.
“We will of course communicate directly to customers well in advance of any changes to their products and services.”
An operational update also stated that Jim Brown will retire as chief executive of Sainsbury’s Bank, to be replaced by Robert Mulhall, the former head of Allied Irish Bank’s UK division, at the end of March.
Originally a 50/50 joint venture with Bank of Scotland in 1997, former Sainsbury’s chief executive Justin King bought out the bank’s share for £248m in 2014.
However, strategy has shifted over the last decade, while the bank is contributing less to the balance sheet. Half-year operating profits from financial services, including the bank, fell from £19m to £13m year-on-year.
Last summer, Sainsbury’s sold its mortgage book to the Co-operative Bank for £464m.
Tesco Bank, which is also headquartered at Edinburgh Park, is also rumoured to be looking to sell, with the likes of HSBC, Barclays and Lloyds all named as potential bidders.
Steve Clayton, head of equity funds, Hargreaves Lansdown, commented that the moves speak volumes about the state of UK retail financial services.
“Sainsbury’s offers a book of generally decent quality banking customers all nicely parcelled up, but nobody is prepared to pay to acquire the book, suggesting a lack of confidence in the ability to extract a decent margin going forward.
“For its part, Sainsbury is looking to de-risk its exposures by earning commissions from allowing other firms to sell to the Sainsbury’s Bank clientele.”
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