25 October 2014

Sainsbury's acquires full control of banking arm; hires FIS as core provider

08 May 2013  |  3875 views  |  1 sainsburys bank

UK supermarket chain Sainsbury's has confirmed its intention to assume full control of its banking operations and has hired US-based FIS as its chief technology partner.

The UK retailer is to pay Lloyds Banking Group £248 million for its 50% share in Sainsbury's bank.

The bank, launched in 1997, has delivered five consecutive years of profit growth, returning £59 million in earnings in 2012/2013.

Sainsbury's says full ownership will allow future products to be even more tailored to its customers by using Nectar loyalty card data to drive sales in both financial services and the core supermarket business. Currently, approximately one in 20 Sainsbury's customers holds a financial product and the chain believes there is significant opportunity to increase this number having taken full ownership.

Justin King, Sainsbury's chief executive comments: "We have 23 million transactions each week by customers who know and trust the Sainsbury's brand. 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."

Sainsbury's has put in place a 42-month transition plan to transfer data away from Lloyds' systems to its new platform. Call centre services will be provided in-house by the bank and banking platforms will be delivered by FIS.

Once double running costs are included, underlying profit is expected to be broadly flat in the first two years. Over a four year period, the bank will also incur transition revenue costs of £170 million and transition capital expenditure of £90 million, in order to build and move onto the new banking platform.

Sainsbury's has appointed career Barclays banker Roger Davis as non-executive chairman and Peter Griffiths, formerly of NatWest and Principality Building Society, as CEO.

Comments: (1)

A Finextra member | 08 May, 2013, 12:19

Great news and a sign of things to come. The entry price for new Banks is far too high and Sainsburys has invested over a long period of time to get to this position. Hopefully the Government can ease the burden cost to enable many more niche banks to enter the ring. In the meantime i expect Sainsburys to go forward from here and be a future major player in FS. Watch out for transition costs though as this is not easy. They should invest in their own architecture with state of the art modern systems and technology and not drop into the legacy trap that so many banks are in 

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