Virgin gets clearance for launch into banking

Branson group buys retail banking minnow as prelude to bid for Northern Rock

Virgin Money has made its long-awaited bow in the retail banking market, yesterday agreeing to buy Church House Trust in a deal worth nearly £50m. The agreement gives Sir Richard Branson's group a banking licence for the first time, and provides a platform for Virgin to bid for Northern Rock when the state-owned bank is eventually sold.

The move comes two years after Sir Richard offered to buy Rock after the Government was forced to take over the running of the beleaguered mortgage lender, only to see it nationalised instead. The Church House Trust deal is less ambitious: the Yeovil-based private bank has just 3,000 customers, with whom it deals on the phone, or by visiting clients' homes. The bank made profits of just £450,000 in 2008. Virgin Money, which already offers savings, credit cards and insurance policies online, will rebrand the bank.

The deal values Church House Trust at £12.3m, with Virgin adding yesterday that it will invest some £37.3m, giving the combined business a tier one capital ratio of more than 35 per cent. Sir Richard, who has long coveted a banking presence on the high street, is likely to add to Virgin Money's portfolio. "The Church House Trust business offers us a strong platform for growth," he said. "Virgin Money aims to bring simplicity to the UK banking market which has traditionally been a complex sector."

Church House Trust's conservatism attracted Virgin. The bank has never relied on wholesale markets, which until the credit crisis allowed the likes of Rock to borrow cheaply and lend to more customers seeking mortgages.

"The financial crisis has tarnished the reputation of many UK banks," said Jayne Anne Gadhia, Virgin Money's chief executive. "Virgin Money will provide a better, different form of banking to its customers, increasing competition in the sector."

Ms Gadhia claimed Virgin Money's approach to banking would benefit customers while also providing shareholders with a profit. "We see the acquisition of Church House Trust as a strong and sensible first step in delivering Virgin Money's banking ambition," she said.

A spokesman for Virgin Money refused to rule out making a renewed bid for Rock when UKFI, the body set up to manage the Government's stake in those banks that have received state bailouts, decides to sell. Rock was split in two at the start of the year: a "good" bank known as Northern Rock, which manages £19bn of savings and £10bn of quality mortgages, and Northern Rock Asset Management, where the bulk of the bank's bad debt will remain. The spokesman also declined to rule out bids for parts of Royal Bank of Scotland and Lloyds Banking Group when taxpayer's stakes in those banks are sold.

Banks such as National Australia and Brazil's Banco Itaú are also said to be circling the publicly held stakes of the UK's banks. Yet they could all be left waiting for some time. Despite rumours of potential suitors, UKFI is yet to draw up plans to sell any of its assets, though the good part of Rock is thought likely to be the first offering.

Consumer groups welcomed Virgin's entry into the banking market yesterday. "Consumers will welcome the prospect of more choice on the high street," said Which? chief executive Peter Vicary-Smith. "There's a definite appetite for switching accounts if people feel they've been badly treated by their bank."

The Government will also welcome the entry of competitors such as Virgin Money to the UK banking sector. It announced last year that it wanted to boost competition in the sector and that it would use its stakes in banks bailed out following the credit crunch with that aim in mind.

German supporters (left) and Argentina fans
world cup 2014Final gives England fans a choice between to old enemies
Arts and Entertainment
Armando Iannucci, the creator of 'The Thick of It' says he has
tvArmando Iannucci to concentrate on US show Veep
Life and Style
Pepper, the 3ft 11in shiny box of circuits who can tell jokes and respond to human emotions
techDavid McNeill tests the mettle of one of the new generation of androids being developed in Tokyo
Arts and Entertainment
A still from the worldwide Dawn of the Planet of the Apes trailer debut
ebookA unique anthology of reporting and analysis of a crucial period of history
Four ski officials in Slovenia have been suspended following allegations of results rigging
sportFour Slovenian officials suspended after allegations they helped violinist get slalom place
14 March 2011: George Clooney testifies before the Senate Foreign Relations Committee during a hearing titled 'Sudan and South Sudan: Independence and Insecurity.' Clooney is co-founder of the Satellite Sentinel Project which uses private satellites to collect evidence of crimes against civilian populations in Sudan
Arts and Entertainment
Balaban is indirectly responsible for the existence of Downton Abbey, having first discovered Julian Fellowes' talents as a screenwriter
tvCast members told to lose weight after snacking on set
Life and Style
More than half of young adults have engaged in 'unwanted but consensual sexting with a committed partner,' according to research
Life and Style
A binge is classed as four or more alcoholic drinks for women and five or more for men, consumed over a roughly two-hour period
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Programme Support, Coms, Bristol, £300-350p/d

£300 - £350 per day + competitive: Orgtel: My client, a leading bank, is curre...

(Junior) IT Systems Administrator / Infrastructure Analyst

£28000 - £32000 per annum + pension, 25 days holiday: Ashdown Group: A highly ...

Finance Officer

Negotiable: Randstad Education Birmingham: Randstad Education are seeking a Fi...

Accounts Payable

£12 - £15 per hour: Cameron Kennedy Recruitment: Excellent opportunity to join...

Day In a Page

A History of the First World War in 100 Moments: Peace without magnanimity - the summit in a railway siding that ended the fighting

A History of the First World War in 100 Moments

Peace without magnanimity - the summit in a railway siding that ended the fighting
Scottish independence: How the Commonwealth Games could swing the vote

Scottish independence: How the Commonwealth Games could swing the vote

In the final part of our series, Chris Green arrives in Glasgow - a host city struggling to keep the politics out of its celebration of sport
Out in the cold: A writer spends a night on the streets and hears the stories of the homeless

A writer spends a night on the streets

Rough sleepers - the homeless, the destitute and the drunk - exist in every city. Will Nicoll meets those whose luck has run out
Striking new stations, high-speed links and (whisper it) better services - the UK's railways are entering a new golden age

UK's railways are entering a new golden age

New stations are opening across the country and our railways appear to be entering an era not seen in Britain since the early 1950s
Conchita Wurst becomes a 'bride' on the Paris catwalk - and proves there is life after Eurovision

Conchita becomes a 'bride' on Paris catwalk

Alexander Fury salutes the Eurovision Song Contest winner's latest triumph
Pétanque World Championship in Marseilles hit by

Pétanque 'world cup' hit by death threats

This year's most acrimonious sporting event took place in France, not Brazil. How did pétanque get so passionate?
Whelks are healthy, versatile and sustainable - so why did we stop eating them in the UK?

Why did we stop eating whelks?

Whelks were the Victorian equivalent of the donor kebab and our stocks are abundant. So why do we now export them all to the Far East?
10 best women's sunglasses

In the shade: 10 best women's sunglasses

From luxury bespoke eyewear to fun festival sunnies, we round up the shades to be seen in this summer
Germany vs Argentina World Cup 2014: Lionel Messi? Javier Mascherano is key for Argentina...

World Cup final: Messi? Mascherano is key for Argentina...

No 10 is always centre of attention but Barça team-mate is just as crucial to finalists’ hopes
Siobhan-Marie O’Connor: Swimmer knows she needs Glasgow joy on road to Rio

Siobhan-Marie O’Connor: Swimmer needs Glasgow joy on road to Rio

18-year-old says this month’s Commonwealth Games are a key staging post in her career before time slips away
The true Gaza back-story that the Israelis aren’t telling this week

The true Gaza back-story that the Israelis aren’t telling this week

A future Palestine state will have no borders and be an enclave within Israel, surrounded on all sides by Israeli-held territory, says Robert Fisk
A History of the First World War in 100 Moments: The German people demand an end to the fighting

A History of the First World War in 100 Moments

The German people demand an end to the fighting
New play by Oscar Wilde's grandson reveals what the Irish wit said at his trials

New play reveals what Oscar Wilde said at trials

For a century, what Wilde actually said at his trials was a mystery. But the recent discovery of shorthand notes changed that. Now his grandson Merlin Holland has turned them into a play
Can scientists save the world's sea life from

Can scientists save our sea life?

By the end of the century, the only living things left in our oceans could be plankton and jellyfish. Alex Renton meets the scientists who are trying to turn the tide
Richard III, Trafalgar Studios, review: Martin Freeman gives highly intelligent performance

Richard III review

Martin Freeman’s psychotic monarch is big on mockery but wanting in malice