Nationwide in clear for Virgin Money takeover
NATIONWIDE Building Society’s £2.9bn takeover of Virgin Money has cleared a major hurdle with approval from the Competition and Markets Authority (CMA).
The UK watchdog said the move did not mean a realistic prospect of reduced competition across owner occupied and buy-to-let mortgages and credit cards. Virgin – which has its main offices in Newcastle and Glasgow – welcomed the outcome, which now paves the way to create the country’s second largest provider of mortgages.
It follows a recent admission from Nationwide, which proposed the takeover of the challenger bank in March, that it could take a significant period to fully merge Virgin amid promises to address IT and customer service issues at the bank. Savers and borrowers are likely to continue to see Virgin-branded branches on high streets for between four to six years.
In its inquiry, the CMA said it had also received concerns that Nationwide members should have had the opportunity to vote on the acquisition, but that the issue did fall within its remit. In May, a majority of 89% of Virgin Money shareholders voted in favour of the deal.
At this week’s Nationwide AGM, Debbie Crosbie, the mutual’s chief executive, said there had been a “huge amount of careful consideration of both the risks and opportunities” of buying Virgin Money. But she said the building society was “very confident that the profits will more than cover any costs of integrating the business”.
She also pointed to the bank’s range of credit cards as one of the reasons for the decision to buy it. In its assessment, the CMA said that while Virgin is a relatively large provider, others such as Lloyds, Barclays, NatWest and HSBC would provide sufficient competition in the credit market.
On home loans, the watchdog said that while Nationwide is a strong provider, others such as Lloyds, NatWest and Santander in Great Britain, Ulster Bank and Allied Irish Bank in Northern Ireland, would provide the right competition. And in the buy-tolet mortgage space, it said that although the merged business would be the largest provider by some measures, NatWest, Santander, Barclays and other specialist lenders would bring competition.
A Virgin Money spokesperson said: “We welcome the CMA’s decision to unconditionally clear the proposed acquisition by Nationwide following its Phase 1 investigation. The enlarged group will combine two complementary businesses that together can offer more great products and services to a larger customer base. We continue to expect that the transaction will complete in the fourth quarter of this year.”
The decision paves the way for the joining of the country’s fifth and sixth largest retail lenders to create a combined group of 25,000 staff and 700 branches serving 24.5m customers.