Sainsbury's shrugged off the news of falling pre-tax profits by announcing that it was buying up the remaining half of its banking operation from Lloyds Banking Group for £248 million.
Sainsbury’s Bank became a joint-venture with HBOS in 2007 after initially setting up in partnership with the Bank of Scotland 10 years earlier.
The bank offers credit cards, savings accounts, loans, insurance, and a currency-exchange service. It currently has around 1.5 million active customer accounts.
The supermarket said that the transition of support and back office services from Lloyds would take place over the next 42 months.
Sainsbury's hopes to expand its 1.5 million active customer accounts as it buys out the 50% stake from Lloyds.
Sainsbury's said that the move from the part-taxpayer-owned Lloyds would provide a "significant opportunity to prudently grow the bank,” adding that it would provide a £100 million boost in capital to the brand over a three year period.
It also expressed its wish to correlate products more closely to the needs of Sainsbury’s customers, and plans to use Nectar card data to inform its financial service development.
Chief executive of Sainsbury's, Justin King, said: "This is an exciting transaction for Sainsbury's which has the potential to deliver significant benefits to our shareholders, customers and colleagues.
The Importance of Trust
Mr King also reflected upon the ‘trust’ that the brand has established with its customer base – a far cry from Lloyds, which has seen numerous hits to its credibility in recent months.
The beleaguered group has set aside more for PPI mis-selling activity than any other bank. In February, it received a £4.3 million fine from the Financial Services Authority for delays in paying out compensation to affected customers (read more).
The bank's staff have also exposed its ‘Salespoints’ scheme, which prioritised products that were valuable to the bank rather than those necessarily best suited to customers’ needs.
(See our feature: Salespoints, Selling & Scandals: Lloyds TSB.)
To Mr King, trust is fundamental to increasing the customer base of Sainsbury's Bank.
"We have 23 million transactions each week by customers who know and trust the Sainsbury's brand," he said.
"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."
Keith McDonald
Which4U Editor
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