The lenders confirmed they’re in talks for Nationwide to acquire Virgin Money in a near-£3bn deal. Here are five key points for savers, borrowers and investors to know about the potential move.
The boards of both Nationwide and Virgin Money said they believe that if it proceeds, the potential acquisition “would combine two complementary businesses”.
It would take total assets to approximately £366.3bn, with total lending and advances in the region of £283.5bn.
Upon completion, this would make it the second-largest provider of mortgages and savings in the UK.
Virgin Money is currently the UK’s sixth-biggest retail bank by total assets and has a customer base of around 6.6 million and total lending of £72.8bn. Within its unsecured lending business, it has £6.7bn of balances and an estimated 8.6% market share of UK credit cards.
Nationwide is the world’s largest building society, with over 17 million customers and 18,000 employees across its 600+ branches and head office.
A statement read: “The Nationwide board believes that the potential acquisition would create a combined group with enhanced financial strength, including through access to greater diversity of funding, notably from business deposits, and the opportunity to generate improved returns.
“Nationwide expects to be able to capitalise on this financial strength to support the continued provision of its ‘Fairer Share Payment’ to eligible Nationwide members and member financial benefits via mortgage and savings rates that are, on average, better than the market average, along with other incentives.”
But for customers with mortgages, savings and credit cards, as well as investors in Virgin Money, what does this potential acquisition mean?
Below are five key points about the move:
1) Existing product terms and conditions
At this stage, it’s too early to speculate, but the statement noted that Nationwide would seek to integrate Virgin Money gradually over multiple years into the Nationwide group, “prioritising good customer outcomes” following the completion of comprehensive planning and engagement with relevant stakeholders.
The joint statement added: “Nationwide is committed to maintaining its breadth of coverage and, over time, the combined group’s customers would benefit from the enlarged range of products and propositions on offer. Virgin Money customers would not automatically become members of Nationwide.
“Nationwide offers a comprehensive range of wider retail financial services and products, including credit cards, personal loans and insurance. These offerings diversify its income, and help it give value back to its customers, through better product pricing than the market average and better service than its peers.”
2) Banking licence and savings protection
Under the Financial Services Compensation Scheme (FSCS), the first £85,000 per UK-regulated financial institution is protected, meaning you’d get your savings back up to this limit if the worst were to happen (£170,000 for joint account holders).
However, individual banks may be part of a banking brand and share a banking licence, meaning if you had money split across these firms, the maximum you’d get back is up to £85,000.
Others may be part of a group but have single banking licences, so even if you had accounts at different institutions, you’d have the maximum £85,000 protection per bank.
The statement wrote that in the medium term, Virgin Money would continue to operate as a “separate legal entity within the Nationwide group, with a separate board of directors and a separate banking licence”.
This means you’d be protected up to £85,000 with Nationwide, and would also be protected up to £85,000 with Virgin Money.
3) Shareholder dividends
Unlike banks, as a mutual, Nationwide – the world’s largest building society – is owned by these members, not shareholders.
The CEO of Nationwide, Debbie Crosbie, said: “Importantly, Nationwide will remain a building society, and a combined group would bring the benefits of fairer banking and mutual ownership to more people in the UK.”
The chair of Nationwide, Kevin Parry, added: “The combination would increase Nationwide’s scale and financial strength, put us in a stronger position to continue to provide Fairer Share Payments to eligible Nationwide members, and offer rates for mortgages and savings that are, on average, better than the market average.”
Meanwhile, chair of Virgin Money UK plc David Bennett added that the potential acquisition would deliver attractive value for its shareholders.
The statement read: “If, on or after the date of this announcement and before completion of the potential acquisition, other than the FY2024 dividend, the final dividend and any repurchases of Virgin Money shares by Virgin Money pursuant to the Buyback Programme, any dividend, distribution or other return of capital or value is announced, declared, made or paid by Virgin Money or becomes payable by Virgin Money in respect of the Virgin Money shares, Nationwide reserves the right to reduce the consideration that would be payable for the Virgin Money shares pursuant to the potential acquisition by an amount up to the amount of such dividend and/or distribution and/or other return of capital or value.
“In such circumstances, Virgin Money shareholders would be entitled to receive and retain any such dividend and/or other distribution and/or return of capital or value to which they are entitled.”
A proposed dividend of two pence per Virgin Money Share (the “FY2024 dividend”) is to be paid (subject to the approval of the Virgin Money board) as part of Virgin Money’s ordinary course FY2024 dividend calendar.
The statement added: “In addition to the total value of 220 pence per Virgin Money share, eligible Virgin Money Shareholders would continue to be entitled to receive and retain the final dividend of two pence per Virgin Money Share in respect of FY2023, which will be paid on 20 March 2024 (the “Final Dividend”).
4) Bank branches
Nationwide currently has just over 600 bank branches and, at the same time it announced its re-brand in October, it promised not to leave any town or city in which it is based until at least 2026.
As part of today’s announcement, it said that Nationwide has the largest single-brand branch network in the UK and “is committed to maintaining its breadth of coverage”.
“Nationwide would keep its ‘branch promise’ and, from completion, it intends to retain a branch everywhere where the combined group is present, until at least the start of 2026. This would be subject to any relevant plans and proposals for branch closures that have already been approved by Virgin Money, and which are ongoing as at completion. In addition, Nationwide values Virgin Money’s ongoing presence in Glasgow and Newcastle,” the statement read.
5) Integration of customers and branding
As part of its “longer-term integration strategy”, Nationwide said it intends for the Virgin Money business to re-brand over time.
It added that it is committed to maintaining its breadth of coverage and, over time, the combined group’s customers would benefit from the enlarged range of products and propositions on offer. Virgin Money customers would not automatically become members of Nationwide.
Under current rules, Nationwide has until 5pm on 4 April 2024 to either announce its firm intention to make an offer for Virgin Money or to withdraw.
The acquisition is subject to regulatory approval, but doesn’t require a member vote.
