Sainsbury's (SBRY) full-year results revealed that the supermarket has traded largely in line with analysts' expectations. But it was news that the group is to take full control of its retail bank - by acquiring Lloyds' 50 per cent stake in the joint venture for £248m - that caught attention.
This acquisition is important for two reasons. First, it's central to Sainsbury's strategic aim of diversifying away from the highly competitive and low-margin groceries business. But ownership of the bank will also give the group more information on its customers. At present, just one in 20 shoppers have banking products from Sainsbury, so management believes there's significant untapped potential for growth. The bank is also profitable - Sainsbury's share of post-tax profit rose 38 per cent to £22m, the fifth consecutive year of profit growth. The deal isn't expected to complete until January 2014 and there will be a 42-month transition period - management expect a cash pay-back on the investment in eight years.