(Alliance News) - NatWest Group PLC on Thursday agreed to buy the retail banking assets and liabilities of Sainsbury's Bank from J Sainsbury PLC.

Under the deal, which comprises Sainsbury Bank's outstanding credit card, unsecured personal loan and saving accounts, the grocer will pay NatWest GBP125 million.

Sainsbury said it expects to return GBP250 million to shareholders once the phased withdrawal from its core banking business has been completed and the future model for the Argos Financial Services operation is in place. The Argos Financial Services division is not included in the NatWest deal.

"Sainsbury's intends to return this capital to shareholders," it added.

Completion of the NatWest deal is expected in the first half of 2025.

High street lender NatWest expects to acquire around GBP2.5 billion of gross customer assets, comprising GBP1.4 billion of unsecured personal loans and GBP1.1 billion of credit cards balances, together with around GBP2.6 billion of customer deposits.

NatWest also expects to add around one million customer accounts.

Automated teller machines, insurance and travel money are not included in the transaction.

The deal is expected to have a 20 basis point impact on NatWest Group's CET1 ratio upon completion and be accretive to earnings per share and return on tangible equity.

NatWest Chief Executive Paul Thwaite said the transaction is a "great opportunity to accelerate the growth of our retail banking business at attractive returns, in line with our strategic priorities".

Thwaite said the deal is expected to add scale to its credit card and unsecured personal lending business.

Sainsbury Chief Executive Simon Roberts said going forward the company will "focus all our time and resources going forward on growing our core retail business, delivering great quality and value, week in week out."

The deal is the latest shake-up in the UK's banking industry after Nationwide Building Society agreed to buy rival lender Virgin Money UK PLC in March, a deal worth about GBP2.9 billion.

In February, Barclays PLC agreed to buy the retail banking business of Tesco Bank from Tesco PLC.

Barclays will pay about GBP600 million for the business, which has been in operation for more than 25 years.

In May, Coventry Building Society agreed to buy Co-operative Bank Holdings PLC for GBP780 million in cash, creating a combined group with assets of around GBP89 billion.

Shares in Sainsbury rose 1.1% to 262.40 pence in London on Thursday morning. Shares in NatWest climbed 0.6% to 314.40p.

By Jeremy Cutler, Alliance News reporter

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