J Sainsbury PLC (LSE:SBRY) has banked £720 million from the sale of its Argos Financial Services (AFS) cards portfolio to NewDay Group.
AFS cards account for around 20% of Argos sales and are held by around two million Argos credit customers.
Sainsbury said the price broadly reflects the expected net value of loan balances and associated provisions when the deal is scheduled to conclude in 2025.
London-based NewDay, which according to its website has £4.3 billion on loan and 3.7 million customers, is headed by John Hourican and chaired by Sir Michael Rake.
As part of the deal, Sainsbury's will be providing a corporate loan of up to £60 million to NewDay in the form of a transferable vendor loan note.
The sale is the latest in a series of moves by Sainsbury's to pull out of financial services.
The supermarket giant sold its bank business to Natwest in June and its ATM operation to NoteMachine in September.
As part of the deal with NewDay, the two are forming a new Argos-branded digital credit proposition to replace the current Argos card credit propositions.
In a statement, Sainsbury’s said the recent sales would allow it to continue to benefit from financial services income streams that have a stronger connection to our retail offer.
Combining commission income from insurance, travel money and ATMs alongside income from the NewDay partnership should deliver annual income from financial services of at least £40 million in the financial year to March 2028, it added.
Sainsbury's Bank is also expected to pay back excess capital of at least £250 million and Sainsbury's reiterated it intends to return this capital to shareholders.
Simon Roberts, the grocer’s chief executive, said: “NewDay is a complementary fit for us as we strive to give customers at Argos the best value and choice and make it as easy as possible for them to buy the products they need."
John Hourican, NewDay's CEO added: “This is a great opportunity to forge a partnership with one of the UK's leading retailers as well as accelerate the growth of our Credit business, in line with our strategic objectives."