Bosses at Nationwide Building Society have revealed a £2.3bn gain following the acquisition of Virgin Money, saying the bank was actually worth significantly more than the price it paid.
The mutual said the Newcastle-based bank’s assets were worth more than £5bn at the time it sealed the £2.8bn takeover deal which completed in early October. Nationwide said the advantages of the acquisition were “significant” and would allow it to become the country’s first “full service” mutual banking provider.
The takeover means Nationwide is now the UK’s second largest provider of mortgages and retail deposits with assets of more than £370bn. It also gives the mutual a network of nearly 700 branches throughout the UK – including Virgin Money locations which it has pledged to keep until at least 2028.
Nationwide says it will now take a long term approach to managing the profitable Virgin Money business – launching an 18 month strategic review to facilitate its integration. Around 500 new jobs are now being created by building society – including some in the North East – across parts of the business including IT, customer service and business growth.
Debbie Crosbie, chief executive of Nationwide Building Society, said: “Nationwide delivered record first half growth in both mortgages and deposits, and record member value. Over the past 18 months, our mutual model has enabled us to provide over £3.5bn in member value, including £729m through the Nationwide Fairer Share Payment.
“Following our acquisition of Virgin Money on October 1, we’ve recorded a gain of £2.3bn, as the value of net assets acquired is well above the price we paid. This gain provides significant headroom to cover our investment in integration, as well as in service and value. Future profits generated by Virgin Money can now be used for the benefit of customers, rather than being paid to external shareholders.”
The updates came as separate earnings were posted for Nationwide and Virgin in the six months to the end of September. Investors were shown that Virgin delivered a 9% increase in statutory total income to £984m while customer lending was 2% lower at £71.3bn. Nationwide reported total underlying income of £2.12bn, down from £2.44bn.