Combined with Virgin Money’s existing business of three million customers, the enlarged Group will have four million customers, will be strongly capitalised and will be highly liquid. Sir David Clementi will be Chairman of the combined business and Jayne-Anne Gadhia will be its Chief Executive Officer. The combined business will operate under the Virgin Money brand.
The acquisition, upon completion, includes:
- 75 Northern Rock branches
- One million customers
- c.£14bn mortgage book
- c.£16bn retail deposit book
- c.2,100 employees.
The acquisition was funded by an investment consortium led by Virgin Group and WL Ross & Co and represents a £400m loss for the taxpayer although the final figure paid could increase by a further £280m dependent on a floatation within 5 years.
Commenting on the news, Nasir Zubairi, MD, EuroTRX
"Their entry into commercial banking is not unexpected, but later than I would have envisioned. The route to market is interesting and logical; however, though it facilitates speed of entry, the overall cost, including the purchase of Northern Rock and the inevitable expense that will be incurred streamlining and remodelling operations could be considerable – the bank, particularly in terms of technology, is a mess. The focus for Virgin needs to turn quickly to re-branding – this is the core asset that will deliver return on capital through growth. Being a branded house, they must correctly leverage the key associations of the parent - trust, youthfulness, innovation and quality - in designing and delivering their banking service to be successful. Obviously, Virgin's most distinctive brand resource is Richard Branson himself, but it will be interesting to see how he is leveraged for this banking venture. There has been a window of opportunity for a non-bank with a strong consumer brand to enter the industry for some time. Whether a high street presence is really necessary and warranted will only be proven over time as I am sure Virgin's move will spark other large corporates with strong brands and good distribution to look at the market. Tesco are already on their way. GoogleBank?
