Sign up for our breaking news emails to receive free real-time alerts sent directly to your inbox.
Register for our complimentary email updates on breaking news.
The Nationwide Building Society is planning to acquire Virgin Money for a proposed amount of £2.9 billion. This will result in the formation of a major UK lending company.
Nationwide’s unforeseen action will elevate them to the second spot in the competitive mortgage and savings industry.
The proposed acquisition will merge the fifth and sixth largest retail banks in Britain, resulting in a combined company with approximately 24.5 million clients, over 25,000 employees, and nearly 700 physical locations.
The announcement of Nationwide’s acquisition of Virgin Money caught The City by surprise.
This will provide Nationwide with more power to compete with its top four banking competitors – Lloyds, NatWest, HSBC, and Santander.
The combined company will have assets exceeding £366 billion and offer loans and advances of approximately £283.5 billion. This will make the merged group the second biggest lender for mortgages and savings in the UK.
– What is the future of the Virgin Money label?
The agreement will eventually result in the Virgin Money brand no longer being visible on UK high streets.
Nationwide has announced that the Virgin Money brand will be retained at first, but they have also disclosed their intention to rename the company as Nationwide within six years after the takeover is finalized.
There will be a decrease in the choice of banking options for customers, and another company will no longer be listed on the London stock market. This move would result in Virgin Money, a company listed on the FTSE 250, transitioning to a privately owned firm.
– Why was the corporation acquired?
According to Nationwide, the agreement will enable them to speed up their plans and expand their range of products and services more quickly than they could on their own. It will also strengthen their credit card division and commercial banking offerings.
Virgin Money stated that joining forces with Nationwide would enhance our range of services to customers and fulfill our goal of becoming a prominent national player in the banking industry.
According to Susannah Streeter, who is the head of money and markets at Hargreaves Lansdown, Nationwide is looking to strengthen and broaden its sources of funding, utilize business deposits, and give a significant boost to the growth of its services.
She stated that it is uncommon for a listed bank to be acquired by another, but Nationwide is determined to not be stuck in the past and instead wants the expertise and opportunities to acquire potential customers who expect modern and innovative financial services in the future.
– Why now?
Prior to a sharp increase due to the proposed agreement, Virgin Money’s stocks have been facing difficulties over the past few months and have been trading significantly lower than levels seen in 2021 and at the beginning of 2022.
According to Victoria Scholar, a representative from interactive investor, Nationwide has a chance to acquire a valuable asset at a lower price.
“The financial performance of Virgin Money has been difficult, with a decline in annual profit reported in November, leading to numerous downgrades from analysts,” she stated.
In the previous month, Virgin Money stated a decrease in mortgage borrowing due to a deceleration in the property market. Home loans decreased by 2.2% to a total of £57.1 billion in the last quarter of 2023.
“What impact will the agreement have on employees?”
Nationwide employs approximately 18,000 individuals, while 7,300 individuals work for Virgin Money.
Nationwide stated that there are no current plans to significantly alter the number of employees at Virgin Money in the foreseeable future.
However, it is uncertain what will occur in the future or what cost-cutting measures the duo will implement once they merge.
– What impact will it have on branches?
Nationwide has announced that they will maintain a branch in all areas where the merged group is located, at least until the beginning of 2026, as they appreciate the continued presence of Virgin Money in Glasgow and Newcastle.
In recent years, Virgin Money has significantly reduced its number of branches from 91 as a result of closures caused by the increasing popularity of online banking.
Britain’s largest building society, Nationwide, boasts a network of 605 branches, making it the largest in the UK.
What impact will this have on Nationwide’s status as a mutual company?
It has emphasized that it will continue to operate as a mutual building society if the proposed transaction is approved by both Virgin Money’s shareholders and Nationwide’s members.
Can this spur additional deals between British banks?
According to specialists, the acquisition may open up opportunities for further agreements among smaller competitors.
According to Gary Greenwood from Shore Capital, it is evident that there is worth in the industry and smaller banks with lower valuation multiples are at risk of being targeted for acquisition.
Source: independent.co.uk
