Supermarket giant Sainsbury’s is to buy out Lloyds Banking Group’s 50 per cent stake in Sainsbury’s Bank in a £248m deal.
The joint venture offers products including life insurance, critical illness cover, savings accounts, credit cards and loans. The bank pulled out of the mortgage market in July 2004 to concentrate on other products.
Under the terms of the deal Sainsbury’s will pay a cash consideration of £193m for Lloyds’ shares in the bank, based on a net asset value of the bank at £181m plus a £12m premium.
The deal also includes the purchase of £55m of loan stock.
Sainsbury’s announced the deal as part of its annual results, which show Sainsbury’s Bank made a pre-tax profit of £59m for 2012/13.
Overall Sainsbury’s posted an underlying pre-tax profit of £756m, up 6 per cent from £712m for 2011/12. Pre-tax profit was down 1.4 per cent from £799m to £788m.
Basic earnings per share are up 1.9 per cent to 32.6p.
Sainsbury’s chief executive Justin King says: “This is an exciting transaction for Sainsbury’s which has the potential to deliver significant benefits to our shareholders, customers and colleagues.
“We see a great opportunity to increase the number of bank customers by offering accessible, high quality financial services products which reward customers who bank and shop with us. We expect the bank to become an important source of profit diversification and growth, building on the strengths of our core business.”