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Sainsbury’s has agreed a deal to sell its core banking operations to NatWest to significantly scale down its presence in the financial services sector.

The supermarket group previously announced in January it would instigate a phased withdrawal from its core banking business.

In accordance with that strategy, it has today announced the sale of its personal loan, credit card and retail deposit business to NatWest Group.

The deal does not include Sainsbury’s Bank’s commission income businesses, including insurance, ATMs and travel money. Sainsbury’s said these are capital-light and profitable businesses with a strong connection to its core retail offer.

Argos Financial Services is also not included in the transaction. Sainsbury’s said a further update on plans for this business will be provided at a future date.

Sainsbury’s said it expects the Sainsbury’s Bank to return excess capital of at least £250m to Sainsbury’s once the phased withdrawal from its core banking business has been completed and the future model for Argos Financial Services is in place.

It intends to return this capital to shareholders.

Core banking business customers are expected to transfer to NatWest in the first half of calendar year 2025.

Sainsbury’s CEO Simon Roberts said: “I am pleased to be announcing this news today. NatWest’s values and customer focus are a close fit with ours and as one of the UK’s leading banks, NatWest’s scale and financial services expertise will ensure our existing financial services customers continue to be well looked after.

“There will be no immediate change for our bank customers as a result of this announcement. Today’s news means we will focus all our time and resources going forward on growing our core retail business, delivering great quality and value, week in week out.”

Paul Thwaite, NatWest Group CEO, said: “Following today’s announcement, we look forward to welcoming new customers to NatWest Group, where they will benefit from our expertise and award-winning digital banking offering. This transaction is a great opportunity to accelerate the growth of our retail banking business at attractive returns, in line with our strategic priorities.

“As well as a complementary customer base, the transaction is expected to add scale to our credit card and unsecured personal lending business within existing risk appetite. NatWest Group has a strong track record of successful integration, and we are focused on ensuring a smooth transition for customers.”

Morning update

Sucralose and ingredients player Tate & Lyle has agreed a major £1.4bn deal to acquire global ingredients firm CP Kelco.

CP Kelco is a leading provider of pectin, speciality gums and other nature-based ingredients, and its acquisition will “significantly accelerate Tate & Lyle’s strategy to be a leading and differentiated speciality food and beverage solutions business”.

T&L will buy the business from JM Huber, which will become a major shareholder in the newly combined group.

The deal is expected to drive stronger revenue growth and significant adjusted EBITDA margin improvement over the next few years.

It is also expected to be accretive to adjusted earnings per share, including cost synergies only, in the second full financial year following completion, and strongly accretive thereafter.

Under the terms of the deal, Tate & Lyle will acquire CP Kelco for total implied headline consideration at completion of US$1.8bn (£1.4bn), consisting of $1.15bn in cash (£905m), the issue of 75 million share to Huber with a value of $645m (£510m) and a deferred sum of up to £10m on performance.

T&L said the deal “combines two highly complementary businesses”, with Tate & Lyle, a leader in sweetening, mouthfeel and fortification, and CP Kelco, a leader in pectin and speciality gums “to create a leading, global speciality food and beverage solutions business”.

Tate & Lyle CEO Nick Hampton commented: “A combination with CP Kelco is the perfect fit with Tate & Lyle’s growth-focused strategy and purpose. It significantly strengthens our sweetening, mouthfeel and fortification platforms, enhances our solutions capabilities across our four core categories, and unlocks new growth opportunities.

“Together, we will have a compelling customer proposition. With our leading portfolio of speciality ingredients and a world-class team of food science experts, we will be uniquely placed to provide our customers with the solutions they need to meet growing consumer demand for healthier, tastier and more sustainable food and drink.

“The proposed combination with CP Kelco represents a significant acceleration of our growth-focused strategy. It creates a leading, global speciality food and beverage solutions business, ideally placed to benefit from the structural trends towards more plant-based, clean-label and sustainable ingredients and solutions. The growth potential of the proposed combined business is significant and we look forward to the future with confidence and excitement.”

Didier Viala, president, CP Kelco added: “We are delighted to be joining with Tate & Lyle to create a leading and differentiated speciality food and beverage solutions business. CP Kelco and Tate & Lyle are both highly customer-focused businesses with a shared passion for science and innovation.

“With our complementary portfolio and deep technical expertise, we will bring new value to our customers and new opportunities for our employees. This is an exciting time for our combined businesses.”

Elsewhere this morning, packaging giant DS Smith has posted a “robust performance in a challenging environment” issuing its full year results.

It said the macro-economic environment has remained challenging with overall market demand continuing to be weak, leading to a decline in like for like box volumes of 2%.

The largest decline in volume was in northern Europe, which includes the UK and Germany, where the company has a greater weighting to industrial and e-commerce customers. Southern Europe was relatively resilient, and our eastern Europe and North American divisions delivered strong volume growth for the year.

For the 12-month period, revenue was down 16% constant currency to £6.82bn, driven by the decline in box volumes (£129m) and lower selling prices (£1.17bn).

Packaging prices were down £647m, approximately 10%, with the balance reflecting lower external paper, recyclate and energy sales.

Therefore, adjusted operating profit declined 18% on a constant currency basis to £701m.

CEO Miles Roberts commented: “We are pleased to have delivered a robust performance, despite the challenging environment, driven by our focus on customers, quality, service and innovation together with the benefit from our self-help productivity initiatives. I am also very proud of the continued excellent progress in helping our customers’ sustainability challenges and to have achieved our target of one billion units of plastic replaced with fibre-based alternatives 16 months ahead of schedule.

“The positive trends in packaging volumes from the second half of last year have continued into the current financial year and we remain focused on pricing, operational efficiency and tight cost control. The increasing demand is resulting in higher paper and other input costs, including OCC. We anticipate this will be reflected in packaging price rises, with the benefits expected to be weighted to the second half of our current financial year and provide further momentum into FY26.

“In April, we announced a combination with International Paper through an all-share transaction. The combination with International Paper is an attractive opportunity to create a truly international sustainable packaging solutions leader that is well positioned in attractive and growing markets across Europe and North America. We are working collaboratively with International Paper to satisfy the offer conditions and bring about the successful completion of the transaction.”

On the markets this morning, the FTSE 100 is up 0.2% to 8,220.5pts.

Risers include McBride, up 3.5% to 133p, Naked Wines, up 2.7% to 60.9p and THG, up 2% to 64.3p.

Fallers include SSP Group, down 3.1% to 155.1p, Tate & Lyle, down 2.6% to 659.5p and Britvic, down 1.2% to 957.7p.

Yesterday in the City

The FTSE 100 closed up 0.2% yesterday at 8,205.1pts following the drop in CPI inflation to the Bank of England target of 2%.

Cola Europacific Partners, up 1.8% to €69.00, FeverTree, up 1.4% to 1,016p, Just Eat Takeaway.com, up 1.4% to 1,028p, Hilton Food Group, up 1.4% to 900p and Pets and Home, up 1.1% to 301.2p.

Fallers included Kerry Group, down 3.9% to €74.80, Naked Wines, down 3.6% to 59.3p, SSP Group, down 3% to 160p, C&C Group, down 3% to 154.6p, Deliveroo, down 1.3% to 132.1p and THG, down 1.1% to 63.1p.

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