Top executives of Sainsbury's are seriously considering selling its mortgage ledger, as the supermarket giant searches for answers to keep its finances alive after its attempt to acquire a rival's business unit failed, the Telegraph reported.
Sainsbury's is the second biggest chain of superstores in the United Kingdom, with a 16 percent share of the market segment. Its mortgage division, which was valued at around $1.8 billion (1.5 billion pounds) by end of February this year, could have a price tag of 1.3 billion pounds if the company gets a buyer, The Telegraph disclosed.
Completion of the mortgage sale underscores the company's gameplan to streamline its business, boost profits and attract more clients in the coming months.
Sainsbury's is "under pressure" to strengthen stockholder returns after a UK market monitoring agency opposed its partnership with Walmart's Asda unit in February this year, which resulted in the agreement's blocking.
Sales of the company have been falling 15 percent from their recent gains in the first quarter of the year, compared with a nearly 10 percent improvement in the standard FTSE 100 index.
Sainsbury's breached its 200-day moving average in early sessions on Friday. The company has a 200-day MA of $212 and was trading as high as $222.41. Its shares were last trading at $221.39, with 8,703,770 market volume.
A number of market analysts have recently commented on the company's stock performance. Investec lifted its target goal on Sainsbury's from $3.45 to $3.65 and gave it a "Buy" rating.
Deutsche Bank held a "Hold" rating on its stocks in a research statement Friday, as Goldman Sachs upgraded it to "Neutral" and reduced its price aim from $2.91 to $2.80 on Friday. UBS Group kept a "Neutral" rating for Sainsbury's on Tuesday while Shore Capital readjusted its "Sell" rating for the supermarket chain on Monday.
Meanwhile, the company is trying to apply the same strategies of its counterpart, Tesco Plc, which was able to sell its mortgage ledgers earlier in August to Lloyds Banking Group Plc. The notion of a no-Brexit deal did not discourage the British bank from unloading nearly 4 billion pounds for the venture.
According to The Telegraph, the company may find it difficult to unload its loss-incurring unit as a result of high operational costs, citing sources who requested anonymity. Royal Bank of Scotland, on the other hand, and Banco Santander SA were two of the first bidders for Tesco Bank's mortgages, the sources claimed.