20 June 2024

SALE OF CORE BANKING BUSINESS TO NATWEST GROUP

Further to its announcement on 18 January 2024 regarding a phased withdrawal from its core banking business, J Sainsbury PLC ("Sainsbury's") is pleased to announce that it has entered into an agreement for the sale of Sainsbury's Bank plc's ("Sainsbury's Bank") personal loan, credit card and retail deposit portfolios (together the "Core Banking Business") to NatWest Group ("NatWest"), one of the UK's leading banks (the "Transaction"). We expect the Transaction to complete in the first half of calendar year 2025.

This Transaction does not include Sainsbury's Bank's commission income businesses, including insurance, ATMs and travel money. These are capital-light and profitable businesses with a strong connection to Sainsbury's core retail offer.

Argos Financial Services ("AFS") is also not included in the Transaction. A further update on Sainsbury's plans for this business will be provided at a future date.

We expect Sainsbury's Bank to return excess capital of at least £250 million to Sainsbury's once the phased withdrawal from its Core Banking Business has been completed and the future model for Argos Financial Services is in place. Sainsbury's intends to return this capital to shareholders.

Core Banking Business customers are expected to transfer to NatWest in the first half of calendar year 2025. Sainsbury's Bank customers do not need to take any action as a result of this announcement. Further information relating to the transfer of the Core Banking Business to NatWest pursuant to Part VII of the UK Financial Services and Markets Act 2000 will be sent in due course.

There will be no immediate changes to Sainsbury's Bank customers' existing terms and conditions.

Simon Roberts, Sainsbury's CEO said:

"I am pleased to be announcing this news today. NatWest's values and customer focus are a close fit with ours and as one of the UK's leading banks, NatWest's scale and financial services expertise will ensure our existing financial services customers continue to be well looked after. There will be no immediate change for our bank customers as a result of this announcement. Today's news means we will focus all our time and resources going forward on growing our core retail business, delivering great quality and value, week in week out."

Paul Thwaite, NatWest Group CEO said:

"Following today's announcement, we look forward to welcoming new customers to NatWest Group, where they will benefit from our expertise and award-winning digital banking offering. This Transaction is a great opportunity to accelerate the growth of our Retail banking business at attractive returns, in line with our strategic priorities. As well as a complementary customer base, the Transaction is expected to add scale to our credit card and unsecured personal lending business within existing risk appetite.  NatWest Group has a strong track record of successful integration, and we are focussed on ensuring a smooth transition for customers."

Enquiries

Investor Relations                                                               Media

James Collins                                                                         Rebecca Reilly

 +44 (0) 7801 813 074                                                        +44 (0) 20 7695 7295

Additional information

Under the terms of the Transaction, Sainsbury's Bank is expected to transfer a portfolio of capital-intensive assets and financial liabilities from the Sainsbury's Bank balance sheet to NatWest, at an agreed £125 million discount to the balances of the assets and liabilities being transferred. Taking into account £80 million of net provisions already recognised on the asset portfolios being sold, we expect the Transaction to result in a one-off write down on the net book value of the asset and liabilities being sold of approximately £45 million, excluding transaction costs. The final consideration will reflect the value of assets and liabilities transferred at completion of the Transaction and will be subject to certain customary adjustments.^1,2

The transaction will be effected through a banking business transfer under Part VII of the Financial Services and Markets Act 2000, as is typical in the transfer of UK banking businesses. Completion is conditional on court sanction and regulatory approval or non-objection. Prior to completion, customary arrangements are due to be finalised, including a transitional services agreement. Completion is expected to occur during the first half of calendar year 2025.

For the 52 weeks ended 2^nd March 2024, the Core Banking Business generated £7 million of adjusted profit before tax³, in an environment where funding costs continued to rise. There is no change to the previously announced guidance for the expected trading profit for the Financial Services Division of between break even and £15 million for FY24/25.

Robert Mulhall, Chief Executive Officer, Sainsbury's Bank, and Mike Larkin, Chief Financial Officer, Sainsbury's Bank are each individuals who are deemed to be important to the Core Banking Business. Each of these individuals are expected to remain with Sainsbury's Group post-completion and will support Sainsbury's Group with the orderly wind-down / transfer of the remaining Sainsbury's Bank PLC businesses and operations.

Footnotes

1              As at 31 March 2024, the gross asset value of the assets of the portfolio subject to the Transaction was approximately £3.7 billion, comprising of unsecured personal loans and credit cards balances. The value of the financial liabilities was approximately £4.0 billion, which comprises of customer deposits.

2              As at 31 March 2025, the gross asset value of the assets of the portfolio subject to the Transaction is expected to be approximately £2.5 billion, comprising of unsecured personal loans and credit cards balances. The value of the financial liabilities is expected to be approximately £2.6 billion, which comprises customer deposits.

3              Adjusted profit before tax for the Core Banking Business is a non-statutory measure which reflects the profits attributable to the assets that are the subject of the Transaction after deducting all charges except taxation, including an allocation of central overheads and funding costs. Adjusted profit before tax for the Core Banking Business excludes one-off costs associated with the Core Banking Business.

Forward looking statements

This document contains statements which are, or may be deemed to be, "forward looking statements" which are prospective in nature. All statements other than statements of historical fact are forward‐looking statements. They are based on current expectations and projections about future events, and are therefore subject to risks and uncertainties which could cause actual results to differ materially from the future results expressed or implied by the forward‐looking statements. Often, but not always, forward looking statements can be identified by the use of forward looking words such as "plans", "expects", "is expected", "is subject to", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates", "believes", "targets", "aims", "projects" or words or terms of similar substance or the negative thereof, are forward‐looking statements, as well as variations of such words and phrases or statements that certain actions, events or results "may", "could", "should", "would", "might" or "will" be taken, occur or be achieved. Such statements are qualified in their entirety by the inherent risks and uncertainties surrounding future expectations. Forward‐looking statements include statements relating to (a) future capital expenditures, expenses, revenues, earnings, economic performance, indebtedness, financial condition, dividend policy, losses and future prospects, (b) business and management strategies and the expansion and growth of Sainsbury's operations, and (c) the effects of global economic conditions on Sainsbury's business.

Such forward‐looking statements involve known and unknown risks and uncertainties that could significantly affect expected results and are based on certain key assumptions. Many factors may cause actual results, performance or achievements of Sainsbury's to be materially different from any future results, performance or achievements expressed or implied by the forward looking statements. Important factors that could cause actual results, performance or achievements of Sainsbury's to differ materially from the expectations of Sainsbury's, include, among other things, general business and economic conditions globally, industry trends, competition, changes in government and other regulation and policy, including in relation to the environment, health and safety and taxation, labour relations and work stoppages, interest rates and currency fluctuations, changes in its business strategy, political and economic uncertainty and other factors. Such forward‐looking statements should therefore be construed in light of such factors. Neither Sainsbury's nor any of its directors, officers or advisers provides any representation, assurance or guarantee that the occurrence of the events expressed or implied in any forward‐looking statements in this document will actually occur. You are cautioned not to place undue reliance on these forward‐looking statements, which speak only as of the date hereof. Other than in accordance with its legal or regulatory obligations (including under the UK Listing Rules and the Disclosure and Transparency Rules), Sainsbury's is not under any obligation and Sainsbury's expressly disclaims any intention or obligation to update or revise any forward‐looking statements, whether as a result of new information, future events or otherwise.

The release, publication or distribution of this announcement in jurisdictions other than the United Kingdom may be restricted by law and therefore any persons who are subject to the laws of any jurisdiction other than the United Kingdom should inform themselves about, and observe, any applicable requirements. This announcement has been prepared for the purposes of complying with the UK Listing Rules and the information disclosed may not be the same as that which would have been disclosed if this announcement had been prepared in accordance with laws and regulations of any jurisdiction outside of England.

Cautionary Statements

This announcement is not intended to, and does not constitute, or form part of, any offer to sell or an invitation to purchase or subscribe for any securities or a solicitation of any vote or approval in any jurisdiction.

Important information relating to advisers

UBS Investment Bank is acting as sole financial adviser to Sainsbury's. Linklaters LLP is acting as legal adviser to Sainsbury's.

UBS AG London Branch is authorised and regulated by the Financial Market Supervisory Authority in Switzerland. It is authorised by the Prudential Regulation Authority and subject to regulation by the Financial Conduct Authority and limited regulation by the Prudential Regulation Authority in the United Kingdom.  UBS AG London Branch is acting exclusively as sole financial adviser to Sainsbury's and no one else in connection with the Transaction. In connection with such matters, UBS AG London Branch will not regard any other person as its client, nor will it be responsible to any other person for providing the protections afforded to its clients or for providing advice in relation to the Transaction, the contents of this RNS Announcement or any other matter referred to herein.