What Nationwide’s swoop for Virgin Money will mean for you

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Nationwide Constructing Society has launched a proposed £2.9 billion takeover of smaller rival Virgin Cash in a transfer that may create a UK lending big.

The transfer took the Metropolis abruptly and is about to catapult Nationwide into second place within the mortgage and financial savings market.

The deliberate takeover will deliver collectively Britain’s fifth and sixth largest retail lenders, making a mixed group with round 24.5 million clients, greater than 25,000 workers and almost 700 branches.

It’s going to give Nationwide extra clout to problem its huge 4 banking rivals – Lloyds, NatWest, HSBC and Santander.

Collectively, the pair could have whole belongings of greater than £366 billion and lending and advances of about £283.5 billion, making the merged group the second largest supplier of mortgages and financial savings within the UK.

– What is going to occur with the Virgin Cash model?

The deal is about to finally see the Virgin Cash model disappear from UK excessive streets.

Nationwide mentioned it will maintain the Virgin Cash model initially, however revealed it plans to rebrand the enterprise as Nationwide inside six years as soon as the proposed takeover is accomplished.

This may see a discount within the variety of banking manufacturers obtainable to clients, whereas it should additionally see one more firm de-list from the London inventory market, provided that it will imply FTSE 250 agency Virgin Cash being taken personal.

– What are the explanations for the takeover?

Nationwide mentioned that the deal would permit it to “speed up its technique and broaden and deepen its services quicker than could possibly be achieved organically”, whereas boosting its bank card arm and enterprise banking providing.

Virgin Cash mentioned being a part of Nationwide “would increase our buyer providing and full our journey within the banking sector as a nationwide competitor”.

Susannah Streeter, head of cash and markets at Hargreaves Lansdown, mentioned Nationwide “desires to bolster and diversify streams of funding, faucet into enterprise deposits, and provides a rocket increase to the event of its providers”.

“A mutual taking on a listed financial institution is a uncommon transfer, however Nationwide clearly doesn’t wish to be caught previously and desires the know-how and entry to scoop up future clients who demand extra cutting-edge monetary providers,” she added.

– Why now?

Earlier than steep rises on the again of the proposed deal, Virgin Cash’s shares have been struggling in current months and have been buying and selling properly under ranges seen in 2021 and initially of 2022.

Victoria Scholar, at interactive investor, mentioned this gave Nationwide “a possibility to snap up an undervalued asset”.

“Virgin Cash has additionally struggled from a monetary perspective with a stoop in full-year revenue reported final November leading to a collection of downgrades from the analyst group,” she added.

Final month, Virgin Cash reported a fall in mortgage lending amid a slowdown within the housing market, with dwelling loans down 2.2% to £57.1 billion within the closing three months of 2023.

– How will the deal have an effect on workers?

Nationwide has round 18,000 staff and Virgin Cash has about 7,300 workers.

Nationwide mentioned it doesn’t intend to make any “materials adjustments” to the dimensions of Virgin Cash’s workforce “within the close to time period”.

However it’s unclear what is going to occur additional out or what price financial savings the pair will look to make after becoming a member of forces.

– What is going to it imply for branches?

Nationwide mentioned it will maintain a department in every location the place the mixed group is current, till at the very least the beginning of 2026 and “values Virgin Cash’s ongoing presence in Glasgow and Newcastle”.

Virgin Cash has 91 branches, which has been scaled again considerably in recent times after a collection of closures as a result of shift in the direction of on-line banking.

Nationwide is Britain’s largest constructing society with 605 branches – and claims to have the UK’s single largest community of branches.

– What is going to it imply for Nationwide’s standing as a mutual?

It has burdened that it’ll stay a mutual constructing society if the deal goes forward and is given the inexperienced gentle by Virgin Cash’s shareholders and Nationwide’s members.

– Does this begin the gun on extra offers amongst UK banks?

Specialists mentioned the takeover might pave the best way for extra offers among the many smaller gamers.

Gary Greenwood, at Shore Capital, mentioned: “This does underscore that there’s worth within the sector and that smaller banks on low valuation multiples are weak to such approaches.”