Mortgage bank Northern Rock has extended its relationship with Legal & General by agreeing to buy its banking units for £131 million sterling in cash.
Legal & General, Britain's third largest life assurer, said the disposal would generate pre-tax profits of £36 million. Following the sale, it would continue to concentrate on growing its core business of pensions and long-term savings.
"While Legal & General Bank has been innovative and successful, it is operating in a crowded and extremely competitive sector," L&G Chief Executive Mr David Prosser said in a statement.
"Given this environment, we could not ignore a fair offer for our banking subsidiaries particularly as our focus is now on our growing savings and protection businesses."
Legal & General said it will continue, under its existing arrangement with Northern Rock, to sell its long-term savings and protection products to Northern Rock customers.