The banking division of Britain’s second-largest supermarket chain delivered rotten results on Wednesday, turning a $ 48 million profit in 2019-20 into a $ 21 million loss.
In a bad news announcement, Sainsbury’s’ revenue fell 23 percent to $ 341 million, deposits fell 19 percent to $ 5.1 billion, debt fell 27 percent to $ 5.4 billion and customer numbers fell to 14. Percent to 1.8 million.
However, despite the difficult year, the bank was positive in its future. The supermarket said its financial services arm, which was purchased directly from Lloyds Bank Group in 2013, will return to profit next year and then double by 2024.
In red: Sainsbury’s financial services division plunges to $ 21 million in 12 months ending February 2021
The corona virus infection hit supermarket bank’s credit card and personal loan accounts, which fell to $ 600 million and $ 800 million, respectively, and saw the need to travel and withdraw money dry up, and this helped a loss.
But when it comes to recovering credit and demand, the results also mean changing a bank.
At first glance, it formally surrendered in September 2019 when it exited the mortgage market, along with rival Tesco Bank, as an additional challenge to Britain’s major high street names in the early and mid – 2010s.
It decided to reduce its losses as it failed to make any progress in the highly competitive and highly unprofitable market.
Andrew Montlac, managing director of mortgage broker Goreko, said it was ‘money’, ‘the margins are no longer there, and its mortgage division is definitely struggling to wash its own face.’
Following this, mortgage debt fell by $ 600 million in the 12 months to February 2021, and the $ 1.3 billion mortgage assets it currently holds are expected to fall out of its books in the next 12 months. As a result less deposits are required from depositors.
Not so with money: Mike Coupe, former CEO of Sainsbury, shut down cash trays for Sainsbury’s Bank in September 2019
Two years ago, former CEO Mike Coupe announced that the supermarket would no longer plow any capital into the bank, exiting the mortgage market and showing any pretense that this was a real challenge.
Responding to Wednesday’s results, Clive Black, head of research at Shore Capital, said: ‘Zinesbury Bank has been in a car crash for a number of years now, with massive capital and operating costs providing bad returns.
‘Mike Coupe decided to shut down the financial plate’, which he estimated at $ 1.4 billion, while ‘bringing in new management and creating a more focused bank. Like Tesco, Challenge Bank went some time ago. ‘
Homes loans fall by $ 600 million in 2021 as Sainsbury closes its mortgage business
The bank stressed that this did not require more capital, and Black noted, ‘Headline numbers were skewed by first-half performance in 2020.
“The second half was better, and we realize that the title goal of doubling 2019 profits by 2024 is definitely there, however it is still a bad return on investment.”
It appears to be a bank that increases demand from current and new customers for everything from new products to credit cards to travel money, and we believe its calculations are correct.
After all, no cavalry seemed to be coming down the mountain. Although it was announced later last year that Supermarket would sell Sainsbury’s Bank and its $ 5.4 billion balance sheet, there did not appear to be any recipients.
Dr. Black added: ‘Sainsbury was approached about an initiative last year, but nothing was said yesterday, which suggests to us that interest may have cooled.
‘The work in progress would have been minimally mentioned. It looks like a return to the original plan. ‘
However, some were more skeptical about the bank’s prospects and suspected that the supermarket was still undergoing renovations.
James Flower, founder of The Savings Guru and adviser to savings banks, said: ‘The results are a fascinating read. Although the epidemic has hit the bank, a total of $ 2 billion in debt has fallen, all areas have been hit and travel money and revenue from ATMs have been affected.
‘While Sainsbury believes there is a strategy to turn things around, there are other players who make credit cards and loans better, and they can access funds cheaper from retail savings.
“In this regard, I would be surprised if Sainsbury could not sell their financial services division and see it come out of space.”
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