NatWest Group PLC (LSE:NWG)'s acquisition of Sainsbury's financial assets - a deal in which the bank was paid £125 million - will have a positive impact on profitability and NatWest's balance sheet.
According to Shore Capital, NWG's core tier-one ratio (the buffer it keeps in case of a downturn in the markets) will improve by 20 basis points while the transaction will also be accretive to both earnings and return on capital employed.
"NatWest is under-weight from a market share perspective in unsecured personal lending and credit cards, with this having been previously identified by management as an area for growth," Shore said in a note to clients.
"As such, the transaction fits with the group’s strategic objectives, albeit the financial implications are not material enough to warrant a change in our forecasts or investment opinion."
The broker repeated its 'hold' recommendation and 350p price target. In early afternoon trading the stock was up 1.4% at 316.8p.
Earlier NatWest said it had struck a deal to acquire Sainsbury's credit cards, personal loans and savings account businesses.
Customers are expected to be transferred in the first half of next year.
NatWest said it expects to acquire roughly £2.5 billion of gross customer assets, adding around one million new customer accounts, with a 20 basis point reduction from its CET1 capital ratio once completed, but a positive impact on earnings per share and return on tangible equity.
Sainsbury's Bank's insurance, ATMs and travel money commission income businesses will remain under the wing of the supermarket group.