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NatWest Expands Retail Banking with £2.5 Billion Sainsbury’s Acquisition

NatWest Group, one of the largest banks in the U.K., has announced its acquisition of the banking business of Sainsbury’s, the second-largest grocer in the country. The deal, worth £2.5 billion ($3.2 billion), will increase NatWest’s assets and customer accounts, aligning with the bank’s strategy to expand its retail banking operations. This move follows a similar transaction earlier this year, where supermarket chain Tesco sold most of its banking activities to Barclays for £600 million.

NatWest CEO Paul Thwaite expressed confidence in the acquisition, in a statement to Reuters, stating that it would provide a complementary customer base and enhance the bank’s credit card and unsecured personal lending business. He also emphasized NatWest’s track record of successful integration and assured a smooth transition for customers.

Shares of NatWest rose by 0.3% following the announcement, according to Bloomberg, while Sainsbury’s stock experienced a 2.3% increase in early trading. The assets acquired by NatWest include £1.4 billion in unsecured personal loans, £1.1 billion in credit card balances, and approximately £2.6 billion of customer deposits. The deal is expected to be finalized in March 2025, with Sainsbury’s making an additional payment of £125 million to NatWest upon completion.

Sainsbury’s, on the other hand, will retain its commission-income businesses such as insurance, ATMs, and travel money, which are considered capital-light and profitable, and have a strong connection to its core retail operations. The retailer plans to return at least £250 million of excess capital to investors after the disposal of its banking business.

NatWest’s acquisition of Sainsbury’s banking business is part of a broader trend of consolidation in the banking sector, particularly among smaller lenders. This consolidation has been driven by higher interest rates, which have boosted bank profitability. Larger banks have been acquiring smaller rivals, with examples including Coventry building society’s purchase of Co-operative Bank and Nationwide’s takeover of Virgin Money.

The acquisition of Sainsbury’s banking business will further strengthen NatWest’s retail banking division and contribute to its strategic priorities. The deal is subject to regulatory approvals and is expected to have a 20 basis point impact on NatWest’s core capital ratio.