Sainsbury's continues financial services exit with £720m Argos credit card sale

Sainsbury's has finalised an arrangement to offload its Argos credit card portfolio for an estimated £720m, moving away from financial services to concentrate on its core retail operations.

The supermarket chain has indicated that the deal is set to conclude at the end of the first quarter of 2025 and the sale price closely matches the loan balances and related provisions for the portfolio, as reported by City AM.

This latest agreement with the London-headquartered NewDay Group is a continuation of Sainsbury's strategic shift towards bolstering its retail division following earlier, lacklustre efforts to boost competition in the banking industry.

Previously, in June, Sainsbury's entered into an agreement with Natwest for the latter to take over the bulk of Sainsbury's Bank, and then proceeded to sell off its network of cash machines three months thereafter.

Sainsbury's doled out £125m to purchase its banking arm from Natwest, but anticipates that Sainsbury's Bank will ultimately reimburse the grocer with at least £250m in surplus capital to be distributed among its shareholders.

This move took place four months after Tesco divested its principal banking segment to Barclays for £600m, aligning with its "food first" initiative.

After these transformations, Sainsbury's financial services division now primarily generates commission-based income by levying fees on partners allied with its brand and store locations.

The retailer envisages an annual revenue of no less than £40m through March 2028, which would be sourced from its insurance, foreign exchange, and automated teller machines (ATMs), as well as earnings from the freshly established partnership with NewDay.

Sainsbury's has revealed that the Argos credit cards account for approximately 20% of the brand's sales and are used by around two million customers.

The company further stated that there will be no immediate changes for customers as a result of this deal.

NewDay, a provider of credit to shoppers, took over the John Lewis Partnership's rewards card from HSBC two years ago. HSBC has been the owner of M&S Bank since 2004.

Over the past twenty years, supermarkets have been exploring ways to generate additional revenue from their customers beyond food and drink, including ventures into telecommunications, broadband, restaurants, energy and more.