Virgin Money to announce £2bn stock market flotation

Richard Branson

Virgin Money, the bank that is part-owned by Sir Richard Branson and contains some of the remnants of the bailed-out Northern Rock, will announce its flotation on the stock market this week.

Company insiders say the bank is to begin promoting a listing within days and that the business is expected to attract a valuation of around £2bn.

The move, which has been widely expected, will also provide a small £50m windfall for the taxpayer, which Virgin Money agreed to pay to the Treasury if they floated the bank on the stockmarket before 2016.

Branson’s Virgin Group owns 47% of Virgin Money, with US billionaire Wilbur Ross owning about 45%, although bank insiders say that neither major shareholder is looking to sell out totally.

In 2011 Virgin Money paid £747m for Northern Rock’s “good bank”, which was shorn of the toxic mortgages that are still in the hands of the taxpayer.

However, Virgin Money’s estimated £2bn valuation will not represent a paper profit on the Northern Rock deal because the bank has made acquisitions since and does not rely on the rump of Northern Rock for the entirety of its business. Virgin Money will also be the latest challenger bank to list on the stock market. It follows TSB, which was spun out of Lloyds Banking Group earlier this year, alongside the flotations of One Savings Bank and Aldermore.

Other banks waiting in the wings for flotations include Shawbrook, Metro Bank, Santander’s UK division and the Williams & Glynn business carved out of Royal Bank of Scotland.

Earlier this month, Virgin Money reported a quadrupling in underlying profits from £13m to £60m and gave a large hint that a flotation was imminent, with the appointment of Glen Moreno as its chairman.

Moreno, the chairman of publisher Pearson, who had often been cited as a potential candidate to chair a bank, will take over by the middle of next year. He was the acting chairman of UK Financial Investments, set up to manage the government’s shareholdings in UK banks, including Northern Rock, in 2009. He had already left before a deal was agreed to sell the operation to Virgin Money.

Virgin Money, which in its Northern Rock days was briefly the biggest mortgage lender in Britain, said it advanced £2.5bn in loans in the first half of this year, taking its total mortgage book to £20.3bn. But this remains a quarter of the level before Northern Rock imploded, with the controversial book of toxic 125% loan-to-value mortgages still in the hands of the taxpayer.

Speaking this month, Jayne-Anne Gadhia, Virgin Money’s chief executive, said the business benefited from being a challenger bank. “We are not burdened by the historical conduct and legacy challenges that face many incumbent banks. We remain confident that we can continue to make real progress on our quest to make banking better and can continue to grow our business strongly, profitably and responsibly.”

The Competition and Markets Authority has set out plans for an 18-month investigation into services for small business customers and personal accounts because of a lack of competition.

Powered by Guardian.co.ukThis article was written by Simon Goodley, for The Guardian on Sunday 28th September 2014 20.08 Europe/London

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