UK supermarket giant Sainsbury’s is contemplating the sale of its banking arm, which includes its insurance unit, as ultra-low interest rates have placed a huge strain on the company’s margins.
New chief executive officer Simon Roberts has already reached out to UBS, the firm’s financial adviser, to discuss other possible options, according to a Sky News report. Roberts, who was previously Sainsbury’s retail and operations director, succeeded Mike Coupe after his retirement last June.
The potential sale of the company’s banking arm could impact more than two million customers, which include policyholders of its car, home, travel, life, and pet insurance.
The move comes as many small and medium-sized lenders have been facing near-zero interest rates and stiff price competition in recent months, hampering their ability to generate margins.
The situation is aggravated by reports that the Bank of England (BOE) is mulling the imposition of negative interest rates amid the economic disruption brought about by the coronavirus pandemic. Last March, the BOE slashed interest rates to a record low 0.1%.
Sainsbury’s took full control of its banking arm in 2013 after paying £260 million to buy a 50% shareholding from joint venture partner Lloyds Banking Group.
The retailer launched its financial services unit in 1997, targeting customers through several loyalty schemes, hoping this strategy could significantly boost the company’s profits.
