#11 Sainsbury's Bank Debt Investor Update 8th June 2021 Loans Store Cards Savings Credit Cards Mortgages Commissions#2Agenda 2 01 J Sainsbury plc Group Performance 02 Loans Store Cards Savings Credit Cards Mortgages Commissions Financial Services#33 Group Performance James Collins Director of Investor Relations J Sainsbury plc#4Retail sales growth by category Grocery FY Sales up 7.8% 10.5% 5.1% Q1 Q2 1 Exc. fuel 7.4% 7.1% Q4 General Merchandise FY Sales up 8.3% 7.2% 7.6% 6.0% 17.6% Q1 Q2 Q3 Q4 Clothing FY Sales down 8.5% 0.4% Q1 Q2 Q3 (7.5)% (26.7)% 4.2% Q4 Total Retail FY Sales growth¹ 7.3% up 8.5% 7.3% 5.2% Q1 Q2 Q3 Exc. Fuel sales growth 6.8% Fuel (39.1)% 9.2% Q4 0.1% Inc. Fuel sales growth#5Strong digital platform, enabling scale transformation 5 Total Digital Sales up 102% 22% FY 19/20 42% FY 20/21 Digital participation ¹ Groceries online Sales up 120% C&C Delivery 0.3% 8% 3% 1 Of total Retail sales exc. Fuel. Includes SmartShop sales 2 Of total Grocery sales 3 Of total Argos and Habitat sales 4 Participation in stores with handsets 12% 3% 14% H1 FY FY 19/20 20/21 20/21 Digital participation ² Argos Digital Sales up 68% 60% FY 19/20 90% FY 20/21 Digital participation³ Smartshop Sales up 173% 14% 30% FY FY 19/20 20/21 Sales participation 4 Nectar Users up 2.9m 4.5m FY 19/20 7.4m FY 20/21 Digital app users#6Underlying profit before tax 6 UPBT YoY movement £m 586 19/20 UPBT (208) Retail (69) Financial Services Interest +47 356 20/21 UPBT 1 Higher absence costs, pay for vulnerable colleagues isolating, front line colleague bonus 2 Customer and colleague protection measures, distribution costs, reduced rental income 3 Does not include business rates relief of £43m for closed Argos stores in FY20/21 Retail COVID costs £m Colleague costs ¹ Operating costs ² Other Total Retail COVID costs³ H1 20/21 (179) (84) (28) (291) H2 20/21 (139) (29) (26) (194) FY 20/21 (318) (113) (54) (485)#7Group performance overview 7 Free cash flow up 28% 611 784 FY FY 19/20 20/21 All figures £m Working capital movement FY 19/20 (97) 453 FY 20/21 Net debt excluding leases down £539m 1,179 FY 19/20 640 FY 20/21 Dividend per share¹ 10.6p 3.3p 7.3p 10.6p- 1 Special dividend in 2020/21 paid in lieu of final dividend for 2019/20 following the deferral of dividend decision. The total dividend paid in respect of each year is equal at 10.6p per share 3.2p 7.4p Interim Special Interim Final 19/20 20/21 20/21 20/21#8Balance sheet targets • Previous net debt reduction of £750m+ from 18/19 to 22/23 updated to £950m+ reduction by 22/23 8 • Medium leverage reduction target: Net debt/EBITDA² less than 3x Net debt exc. Lease liabilities¹ £m 2,125 FY 15/16 (£603m) 1,522 FY 18/19 1 Net debt definition excludes derivatives not linked to borrowings, and includes perpetual securities as debt 2 Net debt (inc. perpetual securities) on a post-IFRS 16 basis divided by Group underlying EBITDA. Net debt/ EBITDA for FY20/21 was 3.4 times 1,179 FY 19/20 640 FY 20/21 FY 21/22E (£950m) + Target FY 22/23E#9In the next 3 years we will transform our business We are clear on our priorities 9 Food First Better value and innovation Underpinned by buying benefits and lower cost to serve Connected to Customers ● ● Brands that Deliver Customer and profit focus Supporting the core food business Know and serve our customers better, use the power of Nectar ● Save to Invest Structurally lower operating costs to fuel investment in the core Cutting complexity and increasing pace of execution Net Zero 2040 Become net zero by 2040#10Strategic cost reduction 10 Reduce retail operating costs/ sales % by 200 bps+ £m Retail op. costs/ sales% 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 Cost savings, £m Op. costs/ sales, % 2023/24 Accelerated cost saving plans Addressing inflationary cost pressures and volume related increases ● ● ● ● Save to Invest Meeting increased groceries online demand Creating additional annualised capacity creating firepower to invest in the offer and drive returns Key programmes underway#11Delivering for shareholders 11 Profit inflection High returning capital projects Strong free cash flow Cost transformation: 200bp+ reduction in cost to sales • Working with suppliers to unlock value • Funding stronger food performance • 2021/22 UPBT higher than 2019/20¹ ● Reducing cost to serve and improving working capital Argos transformation capital cost £143m, annual cost reduction £105m² • Logistics and infrastructure capital cost £209m, annual cost reduction £150m² ● ● • £950m+ net debt reduction March 2019 to March 2023 • £500m+ average FCF for the three years to March 2025 Sustainable, well covered dividend 1 2019/20 UPBT £586m 2 by March 2024#1212 Sainsbury's Bank Mike Larkin Chief Financial Officer Loans Store Cards Savings Credit Cards Mortgages Commissions#13Continued focus on our strategy 13 Objective ● ● Vision ● To be the provider of Financial Services for loyal Sainsbury's Group Customers An agile, capital and cost efficient provider of simple, mobile-led financial services Reshape the Balance Sheet Stop mortgage origination Improve margins Deposits AFS Develop AFS proposition Improve card & insurance momentum • New FS model with Nectar at the core ● Priorities ● Simplify the Organisation Right size the cost base ● • Rationalise products • Review vendor/supplier arrangements Optimise cross-Group synergies • Focus on: ● Strengthen the Business - Operational resilience Conduct - Capital efficiency Build core competency in: Customer experience Digital Data and analytics Credit/ Operational risk - Partnerships -#14Enhancing connectedness 14 Over 77% Bank customers have a nectar card nectar £0.5bn Credit Card spend in Group Stores £ Sainsbury's Argos Financial Services funded over £1bn Argos sales Nectar Credit Card Launch in October Argos CARD nectar Doubled Pet insurance sales £ Sainsbury's Extended proposition to Habitat Argos CARD#15Strong digital presence 15 98% of Storecard sales through digital channels Argos CARD Two thirds Bank customers registered with online banking £ Sainsbury's 71% of all Argos payment transactions through mobile app or website Argos CARD 60% of Car & Home Insurance customers self-serve online. £ Sainsbury's c375k registered users on the credit card app 내 Sainsbury's 4.8 out of 5 apple store reviews shows positive impact of increased offering 4 Sainsbury's#1616 Financials at Feb 21#17Financials: UPBT bridge 17 UPBT waterfall £m m 48 FY 19/20 Boooooos UPBT COVID provision (H1) Travel Money and ATMs Reduced lending osace Funding costs Cost action One-off debt sale (H2) (21) FY 20/21 UPBT H1/H2 Split £m H1 20/21 (55) 34 H2 20/21 Impairment impacts#18Financials: management actions 18 Savings blended rate down 74bps % 1 Group contribution basis 1.18 0.44 FY FY 19/20 20/21 Costs¹ £m down 16% 300 FY 19/20 251 FY 20/21 Colleague costs £m down 21% 99 78 FY FY 19/20 20/21#19Financials: balance sheet 19 Customer assets £bn down 27% 7.4 2.7 2.0 1.9 0.9 FY 19/20 5.4 1.9 1.4 1.3 0.8 FY 20/21 T Personal loans Credit cards Mortgages Store cards Total Capital Ratio up 320bps % 17.0% FY 19/20 20.2% FY 20/21 Liquidity Coverage Ratio 49% + 145% FY 19/20 194% FY 20/21#20Financials: credit quality 20 90+ days past due at 18 months % 0.9 Cards 2.0 Loans 6.4 AFS Total Unsecured IFRS 9 12mth PD % Low quality 4% Satisfactory quality 15% 5% Credit impaired % Unsecured lending High quality <=3.02% Satisfactory quality >3.02%; <11.11% 76% High quality Low quality >11.11% Credit impaired 100% Credit provisions Unsecured lending Coverage Ratio 6.3% Provisions 4.9% £5.8bn £4.4bn £0.3bn FY 19/20 FY 20/21 Gross unsecured lending#21Financials: Group performance overview Group contribution basis Total income ¹ Underlying operating profit 2 Customer lending ² Customer deposits Active customers - Bank Active customers - Argos FS Cost/income ratio Net interest margin ³ Bad debt as a percentage of lending 4 CET 1 Ratio 5 Total Capital Ratio 6 Liquidity Coverage Ratio" Total Resource 8 21 FY FY 2020/21 2019/20 £350m £(12)m £5.4bn £5.1bn 1.8m 2.2m 72% 3.5% 1.8% 17.6% 20.2% 194% 2,015 £457m £75m £7.4bn £6.3bn 2.1m 2.2m 66% 3.4% 1.1% 14.1% 17.0% 145% 2,226 Change 23% 116% £2.0bn £1.2bn 14% 0% 6% 10bps 70bps 350bps 320bps 49% 9% Financial Services UPBT £m, Group Contribution 75 34 27 14 FY 19/20 (12) 9 14 (35) FY 20/21 AFS (recognised by Argos) AFS (recognised by Bank) Bank operating loss of £(21)m 1 Net interest, net commission and other operating income 2 Amounts due from customers at the Balance Sheet date in respect of loans, mortgages, credit cards and store cards net of provisions 3 Net interest receivable / average interest-bearing assets 4 Bad debt expense / average net lending 5 Common equity tier 1 capital / risk-weighted assets 6 Total capital/risk-weighted assets 7 Liquidity coverage ratio 12 month average 8 FTE and contractors#22Confident in emergence from COVID 22 Good progress on our priorities 2 years into 5 year strategy Reshape Simplify the Balance Sheet the Organisation Stop mortgage origination Improve margins Deposits AFS Develop AFS proposition Improve card & insurance momentum New FS model with Nectar at the core Right size the cost base Rationalise products Review vendor/supplier arrangements Optimise cross-Group synergies Focus on: - - - - Strengthen the Business Build core competency in: Customer experience Digital Data and analytics Credit/ Operational risk Partnerships - - Operational resilience Conduct Capital efficiency KEY Delivered Work in Progress Not yet begun#23Market Commitments Material short term COVID-19 impact but on track to deliver FY24 strategic commitments 2 3 4 5 Improve returns Financial services cash generative Reduce risk profile to group 23 1 Stop putting cash into Financial Services No capital input from the group¹ Double UPBT; double digit ROCE within 5 years 1 Subject to regulatory changes/ requirements 2 Subject to regulatory approval 3 On a Group contribution basis Upstream cash within 5 years Transform the cost base Cost to Income c.50% within 3 5 years ³ Mortgage acquisition ceased; stable balance sheet 6 Focus on Sainsbury's customer base Increase connectivity and value for group#24Outlook a brand that delivers 24 1 2 3 Strong Profit Outlook Growing connectedness with Sainsbury's and Argos customers On Track to Deliver FY'24 Strategic Commitments#2525 Q&A Loans Store Cards Savings Credit Cards Mortgages Commissions