Sainsbury to offer banking services

BRITAIN'S J. Sainsbury plc stole a march on competitors yesterday by becoming the first supermarket to launch banking services in a link with Bank of Scotland, which analysts said may prove to be a money spinner.

Sainsbury said in a statement it had applied to the Bank of England for authorisation for a new bank to be owned 55 per cent by the company and 45 per cent by Bank of Scotland.

The venture, to be called Sainsbury's Bank, would use telebanking for a range of deposit, lending and cash management services to 12 million customers, the company said. It will kick off in 1997 with the launch of Classic and Gold Visa cards along with account and card based services.

"It certainly shows Sainsbury is alive and kicking, which we had begun to doubt," one sector analyst said. Sainsbury, which turned in its first fall in profits for 22 years last year, was forced to launch its Reward loyalty card in June after arch rival Tesco pipped it to market leader with its ClubCard, and it has been struggling to regain the initiative.

"The bank plan has certainly cheered the market up the initial reaction is clearly positive," the sector analyst said.

Sainsbury shares closed up 10.5p at 360.5p sterling, off a high of 363p.

Analysts warned, however, that Sainsbury's Bank would have to offer attractive deals to secure customers, many of whom already have bank accounts. "It has to undercut the competition or link banking up to Reward points a lot will depend on the marketing," the sector analyst said.

And analysts said the market would still look for progress in its core grocery business sales when Sainsbury reports interim results next Thursday.

Analysts forecasts for half year pre tax profits range from £383 million sterling to £396 million, compared with £450 million previously.