Nationwide Building Society has reached a preliminary agreement to buy Virgin Money as part of a £2.9bn deal.
This deal would create a combined group with total assets of around £366.3bn and total lending and advances of approximately £283.5bn, representing the second largest provider of mortgages and savings in the UK.
The acquisition is subject to a number of pre-conditions, including due diligence in respect of the Virgin Money group.
The Nationwide board believes the acquisition would enable the firm to accelerate its strategy and broaden and deepen its products and services faster than could be achieved organically.
Nationwide chairman, Kevin Parry, said: “A combination with Virgin Money would accelerate Nationwide’s strategy and create a stronger, and more diverse, modern mutual.”
He added the combination would increase Nationwide’s scale and financial strength and put the bank in a stronger position to continue to provide Fairer Share Payments to eligible Nationwide members.
He also stated that it would offer rates for mortgages and savings that are better than the market average.
Virgin Money chairman, David Bennett, said: “The board of Virgin Money is pleased that Nationwide recognises the considerable strengths and opportunities that exist across our business.
“We are confident that a combination would support an exciting new chapter for Virgin Money to benefit from Nationwide’s scale and ambition.”
Industry reaction
The deal garnered a strong reaction from the industry, with SEMH Self-Employed Mortgages director, Graham Cox, saying it threatens Halifax’s status as the UK’s number one mortgage lender by market share.
He added that Nationwide’s reach will also increase banking competition on the high street, which “can only be a good thing for consumers”, given how “complacent” some of the established banks are.
Additionally, Our Mortgage Broker director, Akhil Mair, said the deal could “shake up the UK’s banking landscape for the better” and be a boost for mortgage borrowers.
“We encourage more mergers and acquisitions in the financial sector as they often lead to better offerings and benefits for consumers,” he added.
tom.dunstan@ft.com
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