18th Jan 2024 11:26
(Alliance News) - J Sainsbury PLC on Thursday said it will withdraw from its core Banking business, as British supermarkets get back to basics.
The London-based supermarket chain said it is exploring options in order to improve the financial services offered to its customers and "consistent with the clear focus on our retail businesses".
Sainsbury's said its financial services products will continue to be offered in the future and will be provided by "dedicated financial services providers through a distributed model". It noted that "we already do this successfully with our insurance products".
This will result in a phased withdrawal over time from its core Banking business, Sainsbury's said. with no immediate changes to the products or services that we provide to customers as a result of this decision.
"The writing has been on the wall for Sainsbury's banking operations for some time. With the company openly saying that it has a 'food first' strategy, everything else in the business has played second fiddle in recent years," said AJ Bell investment director Russ Mould.
Sainsbury's said Jim Brown will retire from his role as CEO of Sainsbury's Bank.
It has appointed Robert Mulhall as his successor, who will take up the role at the end of March after a transition period. Mulhall's appointment is also subject to regulatory approval.
Shares in Sainsbury's were up 0.4% at 286.50 pence each in London on Thursday morning.
The development follows reports that Tesco PLC is also exploring the sale of its banking arm. Back in October, Bloomberg reported Tesco had appointed Goldman Sachs Group Inc to serve as its adviser on the sale.
Tesco Bank has more than five million customers and offers a range of banking and insurance services. HSBC Holdings PLC, Barclays PLC and Lloyds Banking Group PLC are reported to have shown interest.
"Over the past two decades, supermarkets saw an opportunity to make more money off their customers than by simply selling food and drink. During this time we've seen various ventures in mobile phones, broadband, energy, garden centres, coffee shops, restaurants, bakeries and more alongside the provision of core financial services," AJ Bell's Mould recalled.
"A lot of these ventures have since been sold on to third parties as the supermarkets go back to their bread and butter, and it feels as if we're now in a new wave of this movement given actions by Sainsbury's and potentially Tesco."
The AJ Bell director also raised the question of whether Sainsbury's refocusing on food will eventually see the grocer sell off its underperforming general merchandise brand Argos.
"The banking announcement refers to a clear focus 'on our retail businesses' rather than simply saying groceries, and so one could deduce that Argos is safe for now. But there will almost certainly be serious questions about its future if it continues to be a drag on the group," Mould said.
By Elizabeth Winter, Alliance News deputy news editor
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