In an announcement to the London Stock Exchange, both Nationwide and Virgin Money said their boards believed that if the acquisition went ahead it would “combine two complementary businesses”.
This would result in a group with assets worth around £336.3bn and lending of approximately £283.5bn. The possible acquisition would make the two the second-largest provider of mortgages and savings in the UK.
Nationwide said it remained committed to being a building society and felt the takeover would allow it to “accelerate its strategy” as well as offer its products and services faster. The mutual also said the return would support its financial strength.
The lenders said the merger would provide good value to customers, adding that taking on Virgin Money’s mortgage portfolio of £57.1bn and deposit portfolio of £67.3bn would enable Nationwide to expand in core lending and deposit markets.
Nationwide said this would also strengthen its position as a leading provider of mortgages, savings and current accounts.
The mutual also said Virgin Money’s credit card and business banking divisions would be beneficial to the business.
Integrating the businesses
Nationwide said Virgin Money would be integrated into the business over multiple years, with the latter operating as a separate entity within the Nationwide group in the medium term. It would have a separate board of directors and banking licence during this part of the process.
The Virgin Money brand is expected to be retained in the medium term, then set to discontinue over a six-year period following the acquisition, then undergo a rebrand.
Nationwide said it did not intend to make any “material changes” to the 7,300-strong Virgin Money workforce in the near term and would safeguard existing employee benefits.
Virgin Money’s customers will not automatically become members of Nationwide, but the combined customers “would benefit from the enlarged range of products and propositions on offer”.
Nationwide said its range of financial services and products diversified its income and allowed it to pass this on to customers through better pricing and service.
The Virgin Money board said it noted the opportunity to benefit from Nationwide’s scale and pace of investments, while Nationwide would make use of Virgin Money’s capabilities and strengths.
An exciting opportunity
Debbie Crosbie, chief executive of Nationwide Building Society, 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, including our continuing commitment to retain existing branches, as part of our ‘Branch Promise’ and leading levels of customer service.
“We believe the combination would create a stronger and more diverse business that will be better-placed to deliver value to our members and customers, both now and in the future.”
David Duffy, chief executive of Virgin Money UK, added: “This potential transaction with Nationwide represents an exciting opportunity to build on the significant progress we have made in becoming the only new tier 1 bank in recent history. The combined scale and strength would expand our customer offering and complete our journey in the banking sector as a national competitor.”
In its most recent set of results, Virgin Money said it had seen a positive start to 2024 and reported a “strong Q1” performance.
