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Ex-RBS executive Brown to become new Sainsbury's Bank chief

A former Royal Bank of Scotland (RBS) executive is to become the next boss of J Sainsbury's financial services arm as the supermarket giant tries to rebuild the division's profitability.

Sky News has learnt that Jim Brown, whose previous roles included running RBS's Ulster Bank business, will be named this week as the next chief executive of Sainsbury's Bank.

Senior staff at the grocer were informed about Mr Brown's appointment on Monday afternoon, with a stock exchange announcement expected on Tuesday.

The appointment of Mr Brown, a well-regarded figure in banking circles, is likely to be interpreted as a signal of Sainsbury's intent to grow a business which has 2m customers across a range of financial services.

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Argos Financial Services, which is also owned by the UK's second-biggest grocer, has a similar number of customers.

His arrival at Sainsbury's Bank later this month will see him replacing Peter Griffiths, who has run the business since 2012.

It will come just over two years after Mr Brown left RBS, where his most recent role was running a division that was due to be spun off by the state-backed lender and rebranded as Williams & Glyn (W&G).

Under a plan hatched by RBS chiefs, W&G would have been separated from the group to satisfy EU state aid requirements and was intended to operate as a major independent force in small business banking.

After years of problems relating to systems and capital requirements, RBS eventually abandoned the plan and conceived an alternative remedy, involving a £750m fund earmarked for challenger banks and digital start-ups.

That plan B has itself hit a string of obstacles, notably relating to decisions about the recipients of some of the funding.

Mr Brown's initial task at Sainsbury's Bank is likely to be ‎to improve the unit's profits, which slipped to £31m on an underlying operating profit basis in the year to 9 March.

The group, run by Mike Coupe, attributed the decline to higher bad debt charges following the adoption of new accounting standards, and a more cautious approach to unsecured lending.

Sainsbury's Bank grew mortgage lending to £1.4bn at the end of the year, and said its new strategy was focused on growing its mortgage book and commission products.

In recent weeks, however, rival Tesco has announced plans to pull out of the UK mortgage market altogether, saying it had ceased new lending to homeowners and was looking to sell its portfolio of 23,000 mortgages owing to "challenging market conditions".

More broadly, supermarkets' foray into financial services has produced modest results over the last 20 years.

Despite their enormous "branch networks" in the form of their stores, Sainsbury's and Tesco have made comparatively little effort to take on the big five high street lenders.

Mr Brown's appointment as Sainsbury's Bank's new chief executive will also come at a time of growing competition from a cluster of digital banks such as Atom Bank and Monzo.

Mr Brown is expected to join Sainsbury's group operating board in addition to his role at the helm of its banking arm.

Sources cautioned against expectations of a major shake-up at Sainsbury's Bank in the short term but acknowledged that the appointment of a heavyweight figure such as Mr Brown would afford the opportunity for a fuller strategic review in due course.

Among his areas of focus‎ is expected to be improving its digital platform to help customers manage their finances more efficiently.

Sainsbury's recent move to take full ownership of the Nectar customer loyalty programme has given it further scope to improve the bank's targeting of consumers.

In addition to mortgages, Sainsbury's Bank offers car and home insurance, foreign currency and credit card products.

The supermarket chain will update investors on its strategy later this year, having seen its ambitious £15bn merger with Asda scuppered by competition watchdogs.

Sainsbury's declined to comment.