Supermarket giant Sainsbury expected to report increased profits

 

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.

According to Sky News, the deal is expected to cost it several hundred million pounds but will provide the supermarket with greater freedom to develop and market new banking products and services.

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 £750 million 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 £16 million in the last financial year but this is expected to rise to around £25 million in this week's results.

The division now has 1.4 million active customers and offers savings, loans and credit cards.

It has benefited from strong growth in personal loans and pet, car and home insurance, as well as tight control over costs and bad debts.

Customers who have a Sainsbury's Bank product are more likely to increase their spend in-store due to targeted offers and promotions using Nectar loyalty data.

Recent figures from market researcher Kantar Worldpanel show Sainsbury's was the only one of the big four supermarkets to grow market share during the 12 weeks to mid-April.

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.

PA

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