Sainsbury's Bank PLC will halt new mortgage lending as part of a cost-cutting move by its parent, U.K. retail group J Sainsbury PLC, the Financial Times reported, citing the group's CEO, Mike Coupe.
The cost to income ratio of Sainsbury's Bank will shrink to 50% in the next five years from 71%, the FT noted.
The bank will receive its last capital injection in 2019 of £35 million as the savings plan is implemented, with Coupe saying that the group needs to simplify the bank as running it proved to be "too expensive," according to the Sept. 25 report. Coupe added that the company will examine plans for the back book and some options for the future.
Some other U.K. banks recently undertook similar measures. Secure Trust Bank PLC announced in January that it was halting new residential mortgage lending amid growing competition. Earlier in September, Tesco Personal Finance PLC sold its £3.7 billion U.K. residential mortgage portfolio to Lloyds Banking Group PLC for a cash consideration of roughly £3.8 billion.
J Sainsbury's cost-cutting plan, which follows the failure of its Asda bid, also includes reducing pension contributions and closing Argos stores. The strategy is expected to help the group achieve annual savings of roughly £500 million over five years, with approximately £50 million of annual savings to come from reduced pension contributions and some £20 million annually from the closures of 70 stand-alone Argos stores.
Coupe said the move was not a plan B for the group but a continuation of a five-year old strategy, the FT added.
