Sainsbury's is going to start doing mortgages

Sainsbury's is thinking outside the box when it comes to future growth - so now it plans to get into the highly competitive mortgage market.

The supermarket chain announced plans to offer a mortgage product through its Sainsbury's Bank by 2017, alongside its preliminary results for the year.

The results were pretty well flagged, with sales already known, but beat analysts expectations on profits.

The key takeaway is that Sainsbury's is making good progress in stopping the rot in its core business.

Supermarkets like Sainsbury's, Tesco, Asda, and Morrisons have been struggling in a price war against German discount upstarts Aldi and Lidl. What is more, as Sainsbury's makes clear in its results, rising wages haven't translated to more supermarket spending "as consumers are choosing to spend their discretionary income on items that they gave up during the recession such as holidays and eating out."

Here are the key numbers from Sainsbury's results:

• Underlying sales down 1.1% to £25.8 billion;
• Underlying profit before tax down 13.8% to £587 million, a shade better than Barclays' forecast 14% fall;
• Like-for-like sales, which discounts sales from new shops opened during the year, down 0.9%.

Bernstein's retail analyst Bruno Monteyne says in a note this morning: "If we look at Sainsbury's journey during 2015/6 we see that is has done a lot of work on removing complexity (much less promotions, less multi-buys, removal of brand match). This has been done while retaining a lead in quality and service, while continuing to outperform supermarket peers in sales."

CEO Mike Coupe says in the results statement: "We continue to outperform our main supermarket peers and maintain market share in a competitive, deflationary environment. We deliver great quality products and services at fair prices, whenever and wherever customers want to shop - and with volumes and transactions up, it is clear customers are responding positively to our offer."

With the core supermarket business under pressure, Sainsbury's is looking for growth elsewhere: clothing, general merchandise, and financial services.

Tu, Sainsbury's clothing brand, is already the sixth biggest clothing retailer in the UK but Sainsbury's says it thinks it can squeeze more growth out of the brand. As for general merchandise, the supermarket's current takeover of catalogue retailer Argos will give an immediate boost to this business, which currently comprises things like toys and home appliances.

Perhaps the most interesting thing though is financial services. Sainsbury's Bank currently has 1.7 million customers and profits there jumped 5% t0 £65 million in the year - a significant bright spot. Personal loans grew by 15% and insurance product sales rose by 10%.

The supermarket is now hoping that it can make more money selling mortgages. It says: "We believe these products will complement our existing financial services portfolio and we expect customers to respond well."

Bernstein's Monteyne says this morning: "Sainsbury's continues to show that its differentiated offer and access to multiple growth channels is driving good results."