Sainsbury’s share price: Grocer set to exit mortgage lending

Sainsbury’s share price: Grocer set to exit mortgage lending
Written by:
Tsveta van Son
24th September 2019
Updated: 11th March 2020

J Sainsbury (LON:SBRY) is expected to exit mortgage lending as it looks to improve the profitability of its banking arm, the Financial Times has reported. The news comes after it emerged earlier this month that the blue-chip grocer was mulling over a radical overhaul of its underperforming banking business.

Sainsbury’s share price has slipped into the red in London this morning, having given up 0.97 percent to 214.40p as of 09:56 BST, and underperforming the benchmark FTSE 100 index which has inched 0.01 percent higher to 7,327.06 points. The group’s shares have given up just under a third of their value over the past year, as compared with about a 1.7-percent fall in the Footsie.

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Sainsbury’s Bank could exit mortgages

The FT reported yesterday that Sainsbury’s was set to exit mortgage lending as part of its new strategy in the wake of its failed merger with Asda. One person with knowledge of the matter told the newspaper that mortgage lending was “very capital intensive, and it’s a big amount of capital for a small amount of customers”. The FTSE 100 group’s mortgage books stands at £1.47 billion, or about a fifth of its total lending.

The retailer is instead expected to refocus its banking arm on providing less capital-intensive services, such as insurance and credit cards, to customers of Sainsbury’s and Argos, especially those who are members of the Nectar loyalty card scheme.

The news comes after FTSE 100 peer Tesco’s (LON:TSCO) banking arm recently moved to sell its mortgage portfolio to Lloyds Banking Group (LON:LLOY).

Analysts on blue-chip supermarket

Barclays lifted its rating on the blue-chip grocer to ‘overweight’ today, without specifying a target on the Sainsbury’s share price, while UBS reaffirmed the company as a ‘buy’. According to MarketBeat, the FTSE 100 supermarket currently has a consensus ‘hold’ rating and an average valuation of 231.91p.

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