UK lenders Sainsbury’s Bank and Co-op reveal possibility of takeover
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It has been revealed that both Sainsbury’s Bank and the Co-op have been receiving preliminary offers for takeover. Both the UK lenders have suffered from ultra-low interest rates particularly due to the impact of COVID-19. According to The Times, this may be the start of a wave of consolidation among UK lenders.
Sainsbury’s, the UK’s second-largest supermarket chain, has revealed plans to possibly sell its banking unit and is now seeking potential buyers. Sainsbury’s bank boasts over 2 million customers to whom it offers a range of financial products including mortgages, Business Finance, credit cards, and insurance. With interest rates plummeting to almost zero, however, the bank can’t seem to keep up with the competition.
According to Sky News, Sainsbury’s chief executive Simon Roberts is speaking to financial advisors about takeover options for Sainsbury’s bank. Allegedly they are considering selling their banking division to larger high-street lenders. This is unrelated to their previous deal with Nationwide in which Sainsbury’s were to sell their mortgage book. This deal was postponed at the start of the pandemic.
It’s difficult to tell what the future will be for Sainsbury’s bank as their spokesperson has stated that these plans for takeover are “preliminary”. They also claim to be on track with the five-year plan that was put in place to support the bank last year. It could be, however, that concerns about negative rates might lead Sainsbury’s to give in to takeover approaches.
The Co-op is another UK lender that has been affected by the economic slowdown. A spokesperson from the Co-op has revealed that there have been negotiations with a financial sponsor and stated to Sky News that they had received a non-binding offer. The Times later revealed this to be from Cerberus, the American private equity group. Although the bank is discussing their options with this sponsor, takeover approaches are very much in the early stages, and by no means certain.
The Co-op Bank, or under its full name the Co-operative Bank made a name for itself as the UK’s only high street bank with a customer-led Ethical Policy. The Co-op Bank doesn’t offer its service to any organisation that conflicts with customers’ values and makes a stand for issues such as human rights, the environment, and other ethical issues. Who knows if the new owner will adopt the same values? For now, the takeover approaches are still very preliminary.
The Co-op Bank, among many others, has struggled this year due to the effects of the pandemic and had to close a quarter of its branches. With interest rates at historic lows and long-term economic uncertainty to look forward to in the future, it’s no surprise they’re thinking about their options. Smaller and medium-sized lenders have been most affected by the coronavirus crisis and there doesn’t seem to be anything positive on the horizon for the time being. It could be that this does lead to a wave of consolidation among British lenders or more takeovers in the future for UK banks.
