Sainsbury's bank sale would make sense, Shore says

A sale of Sainsbury's bank would be a sensible move for the supermarket group as it concentrates on its core retail business, Shore Capital said after a press report that a deal was in the works.

Sky News reported on 28 August that the FTSE 100 company was in talks with Centerbridge Partners, a private equity group, to sell its banking division for about £200m. An announcement could come in the next few weeks, Sky said.

Sainsbury's launched its bank as a joint venture with Bank of Scotland in 1997, promising to draw on customer data and brand loyalty to compete with the UK's big banks.

Tesco also owns a bank that it started with similar aims but the supermarkets have made little progress and have both quit the new mortgage market. In 2013 Sainsbury's took full control of its bank, which has consumed about £1.5bn since launch, according to Shore.

Neither Sainsbury's nor Centerbridge has responded to Sky's report but Shore analyst Clive Black said a sale would make strategic sense. The bank is subscale and a disposal would give Chief Executive Simon Roberts more time and money to concentrate on Sainsbury's food business and Argos general merchandise arm.

"We sense that Mr Roberts has made a firmer decision on the bank within the group," Black wrote in a note to investors reiterating his 'buy' rating on Sainsbury's shares. "Sainsbury, like Tesco, is looking to the future as a cash compounder."