SAINSBURY'S has said its Edinburgh based banking operation saw the value of its loan sales rise 21 per cent in the fourth quarter of the year.

Finance director John Rogers described it as a "great performance" by the bank which Sainsbury's has committed to building up over the next few years.

Mr Rogers suggested it was seeing growth as a result of the investment it had made in products which are seen as better value than many traditional providers.

He said: "It reflects the fact we are top of many of the best buy tables at the moment so are seeing good volume uptick in that particular area."

However in the core supermarket business there was another quarter of falling sales.

In a trading update covering the 10 weeks to March 14 like-for-like retail sales were down 1.9 per cent excluding fuel, the fifth quarterly dip in a row.

Chief executive Mike Coupe admitted the trading environment remains "challenging" and the outlook was uncertain.

He said: "Food deflation is likely to persist for the rest of this calendar year, and competitive pressures on price will continue."

However he felt there were signs the company was holding its own in the sector.

He said: "During the quarter we have seen volume growth across the food business and an average uplift of over three per cent on the 1,100 products where we have made price reductions.

"We believe that the great value and quality of our products, combined with a strong focus on developing our multi-channel offer, will enable us to outperform our supermarket peers."

The convenience store arm was said to have grown by 14 per cent in the period with 23 sites opened.

Online grocery orders also rose by 14 per cent with the business experiencing a record week of 245,000 orders.

Mr Coupe confirmed Sainsbury's is on course to have rolled out its click and collect offering to 100 stores by autumn this year, including a number in Scotland.

He indicated his expectation that it will be a successful venture which has a number of potential areas of expansion.

He said: "We would anticipate that as we roll out our clothing online the propensity for customers to click and collect that offer will be fairly high."

The trial of click and collect for fellow retailer Argos in 10 Sainsbury's store is another area Mr Coupe believes could be extended.

He said: "That is a piece of experimentation about how they might get their click and collect business to work with ours."

Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, warned Sainsbury's may have to cut its dividend as a result food deflation and the money it was putting into price cuts.

Yet he indicated the trading was less disappointing than had been expected and added: "There are some pockets of the business which suggest the possibility of brighter prospects ahead, such as the convenience store offering and a continuing tailwind from the strong Christmas showing in general merchandise and clothing.

"Meanwhile, volumes have increased given the company's focus on pricing, whilst the online offering continues to make a notable contribution."

Sainsbury's Bank, where the supermarket completed the £260m deal to buy the 50 per cent it did not own from Lloyds Banking Group in January last year, employs more than 400 in Edinburgh and also runs around 150 foreign exchange bureaus around the UK.

The bank offers loans, credit cards, savings and insurance products.