Among key news on UK stocks, J Sainsbury PLC (GB:SBRY) (Sainsbury’s) shares soared after the company agreed to sell its banking business to British banking giant NatWest Group (GB:NWG). The deal will allow Sainsbury’s to focus on its food business. Meanwhile, the deal will strengthen NatWest’s position in consumer finance and provide an opportunity to capture a higher market share in retail banking.
Following the announcement, SBRY stock gained over 1%, while NatWest shares rose by 1.31% as of writing.
The disposal by Sainsbury’s, one of the leading supermarket chains in the UK, follows a similar move by its rival Tesco (GB:TSCO), which offloaded its retail banking operations to Barclays (GB:BARC) earlier this year.
More Details on the Sainsbury’s-NatWest Deal
As part of the deal, NatWest will acquire Sainsbury’s personal loan, credit card, and retail deposit portfolios, which would boost the bank’s assets by £2.5 billion. This includes £1.4 billion of unsecured personal loans and £1.1 billion of credit card balances. The deal also includes £2.6 billion of customer deposits. Additionally, Sainsbury’s will pay £125 million as part of this transaction.
However, the deal excludes Sainsbury’s Bank’s commission income businesses, such as insurance, ATMs, and travel money, which are profitable and well-connected to its retail arm.
Jefferies’ analysts praised the deal, stating that it strengthens the consumer loan portfolio for NatWest, which remains its primary focus area.
The company anticipates that Sainsbury’s Bank will return at least £250 million in excess capital to Sainsbury’s after the phased exit from its core banking business. It plans to distribute this capital to its shareholders.
What is the Stock Price Forecast for SBRY in 2024?
On TipRanks, SBRY stock has been assigned a Moderate Buy consensus rating based on three Buys, one Hold, and one Sell recommendation. The J Sainsbury share price target of 303.40p is 15.5% above the current trading level.
