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 can create a UK lending large.

The transfer took the Metropolis unexpectedly and is ready 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 prospects, greater than 25,000 employees and almost 700 branches.

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

Collectively, the pair may have complete property 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 ready to ultimately see the Virgin Cash model disappear from UK excessive streets.

Nationwide stated it might preserve 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.

It will see a discount within the variety of banking manufacturers out there to prospects, whereas it should additionally see yet one more firm de-list from the London inventory market, provided that it might imply FTSE 250 agency Virgin Cash being taken personal.

– What are the explanations for the takeover?

Nationwide stated that the deal would enable it to “speed up its technique and broaden and deepen its services sooner than might be achieved organically”, whereas boosting its bank card arm and enterprise banking providing.

Virgin Cash stated being a part of Nationwide “would broaden 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, stated 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 need to be caught up to now and desires the know-how and entry to scoop up future prospects 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 nicely under ranges seen in 2021 and in the beginning of 2022.

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

“Virgin Cash has additionally struggled from a monetary perspective with a droop in full-year revenue reported final November leading to a sequence 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 residence loans down 2.2% to £57.1 billion within the remaining three months of 2023.

– How will the deal have an effect on employees?

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

Nationwide stated it doesn’t intend to make any “materials adjustments” to the scale 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 stated it might preserve a department in every location the place the mixed group is current, till at the 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 sequence of closures as a result of shift in 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 careworn that it’s going to stay a mutual constructing society if the deal goes forward and is given the inexperienced mild by Virgin Cash’s shareholders and Nationwide’s members.

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

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

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