Virgin Money plans £2 billion flotation

Virgin Money has become the latest challenger bank to announce plans to float on the stock market.

With Lloyds Banking Group well on its way to selling off TSB in its entirety through some wildly successful share sales, it looks like the market is strong for challenger banks.

TSB has seen its shares perform strongly since its initial public offering (IPO). OneSavings Bank, controlled by the US’ JC Flowers, also listed this year and specialist lender Aldermore has announced its intention to follow suit. Now, the next challenger to say it intends to pursue an IPO is Virgin Money.

Based in Newcastle, Virgin Money has 75 branches and customer lounges around the country and is reportedly aiming for a valuation of around £2 billion.

That’s based on strong financial performance – underlying pre-tax profit of £59.7 million in the first six months of the year, way above the £13.1 million reported in the same period last year. Total income also shot up by more than a quarter.

With 2.8 million customers and a sizeable loan portfolio, the company has growth on its mind. It also plans to bolster customer deposits and up its share of the mortgage market – and the £150 million or so that it plans to raise from selling ordinary shares will help to fuel those ambitions.

It’s a far cry from the situation just a few years ago, when in late 2011 Virgin Money agreed to acquire the non-toxic assets of Northern Rock. That bank had been nationalised due to ongoing problems prompted by the financial crisis, and the £747 million deal with Virgin Money was meant to represent the beginning of the bank’s rebirth.

To uphold its end of the agreement it made with the government three years ago, Virgin Money will also pay £50 million to the government on completion of the IPO.

To chief executive Jayne-Anne Gadhia, the flotation is a sign of “just how far the company has come”.

To many, the collapse of Northern Rock was one of the defining moments of the UK’s fall into economic struggles. As the country returns to a new growth phase, it is encouraging to see that the bank has, at least in some form, risen from the ashes.

< Top image: Virgin Money >