Co-op Bank buys Sainsbury’s Bank’s mortgage portfolio in £464m cash deal

Manchester’s Co-operative Bank has completed its first portfolio acquisition in more than a decade, buying Sainsbury’s Bank’s mortgage portfolio for a cash consideration of around £464m.

The portfolio comprises around 3,500 customers with balances of approximately £479m.

The sale follows the September 2019 announcement by Sainsbury’s Bank that it would be stopping all new mortgage sales and was reviewing options for the existing mortgage book.

The deal is expected to complete alongside transfer of beneficial ownership on August 15, 2023, with legal title transfer occurring within 12 months.

Sainsbury’s Bank customers are expected to transfer to The Co-operative Bank over a period of one year to ensure a smooth process.

The Co-op Bank said mortgage customers will benefit from its ongoing transformation and technology re-platforming programme, enabling them to access a suite of services and a full range of products going forward.

Nick Slape, Co-op Bank CEO, said: “Once the transfer activity is complete, we look forward to welcoming the new customers who will benefit from our ambitious new technology platform, which will simplify our banking services and will make us more efficient, giving us the flexibility to introduce new products and services.

“This transaction, our first portfolio acquisition in more than a decade, further demonstrates the progress we have made in recent years and our strength in what remains a competitive UK mortgage market.”

Jim Brown, CEO of Sainsbury’s Bank, said: “We’re pleased to confirm we have agreed the sale of our mortgage book to The Co-operative Bank. Closing the chapter on our mortgage offering is a big step in simplifying our business.

“It’s been really important throughout the process that we find a buyer that will best meet the needs of our customers.

“We chose The Co-operative Bank as it’s a well known UK mortgage provider, committed to providing excellent customer service, so we are confident that The Co-operative Bank will serve our customers well.”

He added: “The sale of the mortgage book will support our strategy to reshape our portfolio and focus on offering capital and cost efficient, mobile-led financial services to loyal Sainsbury’s and Argos customers.”

Sainsbury’s Bank said it intends to use the proceeds from the transaction to help optimise the overall cost of funding for Sainsbury’s Bank.

In the year ended February 28, 2023, the associated direct profit contribution of the mortgage portfolio was £4m.

In February this year the Co-op Bank was reportedly among bidders to buy a £650m loan portfolio being offloaded by Sainsbury’s Bank.

The approach was seen as a signal of the bank’s strong recovery, after twice almost going bust in the past decade.

Deloitte advised Sainsbury’s Bank on the sale

Last month the Co-op Bank said it had delivered a “strong” interim financial performance.

In the six months to June 30, 2023, the bank achieved a total income of £266.5m, up from £229.6m, although pre-tax profits were static at £61.8m.

Earlier this month the Co-op Bank dismissed a mooted merger with fellow PE-backed bank, Shawbrook, as “media speculation”.