Sainsbury's banks on buying out Lloyds' share to boost profits
Published 06/05/2013 | 04:20
Supermarket giant Sainsbury is expected to crown another rise in profits this week with a deal to take full control of its banking business.
The chain is believed to be planning on buying out Lloyds Banking Group's 50% share in Sainsbury's Bank, a joint venture set up in 1997.
The deal is expected to cost several hundred million pounds but will provide the supermarket with greater freedom to develop and market banking products and services, according to Sky News.
It also puts the Edinburgh-based banking operation on the same footing as Tesco after its big rival acquired Royal Bank of Scotland's stake in Tesco Personal Finance five years ago.
The Sainsbury's deal is likely to be announced alongside results on Wednesday showing pre-tax profits of £750m for the year to the end of March, the ninth consecutive rise as chief executive Justin King maintains the chain's improvement since his arrival in March 2004.
Sainsbury's profit from its share of the banking joint venture amounted to £16m in the last financial year but this is expected to rise to around £25m in this week's results.
The division now has 1.4m active customers and offers savings, loans and credit cards, with strong growth in personal loans and pet, car and home insurance.
The sale of the stake in Sainsbury's Bank should benefit Lloyds, which is 41%-owned by taxpayers, at a time when regulators are forcing British banks to bolster their capital reserves.