M&S Bank manages its current accounts and in-store branches
Supermarket banks struggled to compete major lenders, even after the catastrophic damage to the reputations of established players during the 2008 financial crisis.
Last year, Sainsbury’s put its banking business up for sale – around the same time as Cooperative bank, which severed historic ties with the broader cooperative group following a bailout deal in 2017, has also started looking for a buyer.
Tesco sold its mortgage portfolio to Lloyds for £ 3.8bn in 2019 after announcing it would exit the sector due to difficult market conditions.
Sir Philip Hampton, the former chairman of Sainsbury’s and NatWest, said last year he could see why it was difficult for grocers to get into finance. One of the reasons, he says, is that getting people to change banks is notoriously difficult, even when they know they should.
He said: “Most people have stuck with their long-standing bank [after the 2008 crash]. They hoped and expected the banks to behave better. I think this is happening. ”
Companies like Sainsbury’s – which in 1997 became the first supermarket to launch a bank – also branched out into financial services when it made much more business sense to do so.
Bank returns have since been crushed by very low interest rates, lenders face stringent regulatory requirements and costs have skyrocketed.
Sir Philip said: “The bank is much less attractive as a business [now]. It takes a lot more capital, tighter regulation, collapsing margins with low interest rates, [plus] technological and competitive challenges. ”