NatWest-Sainsbury's Bank: Continuing the M&A Simmer

NatWest (NWG: A3/BBB+/A) is buying Sainsbury’s Bank for GBP125m (<0.5% of market cap) so very small for NatWest so unlikely to have a meaningful credit impact. It’s acquiring a balance sheet of around GBP2.6bn.

• The business NWG is buying has GBP2.5bn of customer assets (56% unsecured loans, the rest credit cards) alongside GBP2.6bn of customer deposits. Tesco Bank, the other major supermarket bank in the UK is around three times larger and was bought by Barclays in Feb-24. This had little effect on Barclays’ credit or equity.
• For NWG, this deal is a sensible bolt-on, increasing (marginally) its UK retail banking exposure and it helps Sainsbury with its transition to an asset-light business model. There’s only one target bond likely to be affected positively today (SBRYBK 10.5 ’33).
• There’s been plenty of news and speculation around European banking M&A and, with a few exceptions (BBVA-SAB) this has remaining small and incremental rather than meaningful. In the UK there remains a long tail of small building societies which may huddle together for warmth, not unlike some of the thoughts around smaller Italian banks. BCP in Portugal remains another subject with Caixabank seemingly the buyer most often mentioned.