Sainsbury sells 5% of Sainsbury's Bank to HBOS

J Sainsbury, Britain's third-biggest supermarket operator, said on Friday it had sold a 5% stake in Sainsbury's Bank for 21 million pounds ($41 million) to British banking group HBOS.

Sainsbury's Bank, which started trading in 1997 when it was 55% owned by Sainsbury and 45% by Bank of Scotland, sells products including insurance, credit cards, savings and loans.

"As a result of this transaction the Bank will become a 50/50 joint venture between Sainsbury's and HBOS," Sainsbury said in a statement, adding it would make a profit on disposal of around 10 million pounds.

A consortium of private equity companies is mulling a bid for Sainsbury, lifting its shares sharply over the past week.

HBOS said in a separate statement: "The new structure underlines the commitment both partners have to the joint venture and returning it to profitability."

Sainsbury's Bank made an operating loss of 10 million pounds in the year end-March 2006 when it had net assets of 178 million pounds.

HBOS said that since the appointment of Rob Walker as chief executive of Sainsbury's Bank a year ago it had made good progress, with a breakeven operating result in the six months to end-September.