James Moore: Sainsbury's has its work cut out if it's going to make banking taste better

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The Independent Online

Outlook Bank well for less. Is that going to be the slogan for the new Sainsbury's Bank? New Sainsbury's Bank, you say. But hasn't the show been on the road for 16 years? In fact, wasn't Sainsbury's the first supermarket to dip its toes in these waters?

Indeed it was. But since then dipping its toes in the water is all Sainsbury's has been doing. The price tells you that: the supermarket bought out Lloyds Banking Group from their joint venture for the princely sum of £248m, which amounts to tuppence ha'penny in banking terms.

Sainsbury's Bank was originally created as a joint venture with Bank of Scotland. It made a lot of sense for the two to partner up: BoS didn't have much business outside Scotland while Sainsbury's did, but didn't know much about banking.

The marriage made less sense after BoS merged with Halifax to form HBOS (now part of Lloyds), a business which had lots of customers south of the border, but which made no sense at all towards the end of its life.

Sainsbury's didn't make much sense either for a while in the noughties. Even when it started to turn around management had a fair few challenges to deal with, private-equity takeover bids for starters.

So perhaps it's no wonder that the financial services arm rather drifted. That could change, as a resurgent retailer eyes new horizons now that the core business is humming.

But can Sainsbury's make banking taste better? It remains to be seen.

Sainsbury's is good at customer service, something most banks struggle with. But it will need to show customer TLC is not inimical to banking if the business grows and hires lots of bankers to run it. And it will have to hire bankers: regulators want to have people with experience overseeing banks. Bankers aren't much good at banking, as we've learned to our cost, but retailers can sometimes be even worse. The man in at the helm when HBOS hit the rocks was a retailer: Andy Hornby. Like all retailers, he was good at selling things. But selling lots of loans can get you into lots of trouble if you haven't sold lots of people on depositing with you when the money markets dry up.

Justin King, pictured, has made Sainsbury's a force again, of that there is no doubt. But this is a new frontier he's opening up. Sainsbury's has work to do to get its bank even to the level of Tesco's equivalent, which offers a wider range of products and is now contemplating current accounts.

There is considerable goodwill behind him doing that: those regulators, and their political masters, are desperate for new entrants to reduce the dominance of the big four banks. While Sainsbury's bank is 16 years old, it almost counts as a new entrant if it plans to make a real go of it.

But while that goodwill is nice, for Sainsbury's Bank to succeed it needs the focus and commitment of its parent. Sainsbury's Bank needs the TLC if it's to generate fan mail.