An update on Nationwide’s offer to buy Virgin Money

We confirmed our offer for Virgin Money in March, and Virgin Money’s Board recommended this offer to the Virgin Money shareholders. Virgin Money’s shareholders have now accepted our offer, and we expect to complete the acquisition in the fourth quarter of 2024 (calendar year), subject to regulatory approval.

We will keep you updated on progress through our News hub and in our regular newsletter. You can sign up to receive the newsletter, by updating your preferences.

After the deal, the Nationwide Group – that’s Nationwide Building Society and the companies it owns, which will include Virgin Money – will be able to keep Virgin Money’s profits in the UK and use them for the benefit of our customers and members. In the last financial year, Virgin Money generated pre-tax profits of £345 million* and announced distributions of around £270 million* to shareholders. Based on market analysts’ forecasts for Virgin Money’s pre-tax profits in 2024, the acquisition would represent a 17% return on the purchase price.

* Virgin Money UK plc Annual Report and Accounts 2023.

We are confident in the quality of Virgin Money’s assets and the opportunities this deal brings for our members, following appropriate investigation and review. We believe the price agreed for the Virgin Money business represents good value and will lead to immediate financial benefits for the Society and its members.

The price we have agreed for Virgin Money is also at a considerable discount of £1.5 billion compared to its ‘book’ value*. That means when we complete the deal, we expect to make a significant financial gain. The actual gain will depend on how much Virgin Money’s net assets are worth when the deal has gone through.

Our balance sheet will remain best in class. Even after buying Virgin Money, Nationwide’s Common Equity Tier 1 ratio, a key financial measure used to demonstrate financial strength, will be ahead of our peers and regulatory requirements. The three major credit rating agencies have reaffirmed Nationwide’s existing strong ratings, recognising the transaction will provide the benefits of increased scale and diversification, and the potential to increase long-term profitability.

* Virgin Money’s book value is calculated from the value of its total tangible assets minus its total liabilities and Additional Tier 1 instruments. This is estimated at £4.4 billion, based on the shares in issue and the tangible net asset value per share of 337 pence, as at 31 December 2023 (Virgin Money UK plc Q1 Trading Update 2024). This is £1.5 billion more than the acquisition price of £2.9 billion.

The Nationwide Fairer Share Payment is our way of rewarding those members who choose us for their everyday banking as well as having their mortgage or savings with us. They are trusting us to help them with their day-to-day financial needs. Our Fairer Share Payment rewards them for that choice.

We believe bringing Nationwide together with Virgin Money will strengthen our financial position. This improved financial strength will make it easier for us to continue to reward eligible members through our Fairer Share Payment.

While we want the Fairer Share Payment to be a yearly event, we will only make it if we have enough financial strength.

We believe so. Firstly, Virgin Money’s profits will improve our financial strength. Secondly, adding Virgin Money to the Nationwide Group will make us an even bigger player in UK financial services and lower our funding costs. These are the costs we face when we raise money on the financial markets to fund our lending. With lower costs, we will be able to invest more in our products and services. It also means we expect to be able to provide a greater level of member financial benefits and incentives, including through better savings and mortgage rates compared to the market average.

No. We plan to bring the two businesses together gradually. Virgin Money will join Nationwide as a wholly owned subsidiary with a separate board, management team and banking licence. It will be run separately for a number of years.

This will allow us time to decide whether it is in the interests of members to combine some systems or services. We will only go ahead when we can be sure of minimal disruption. Unlike mergers between banks in the past, our approach does not rely on quick integration or aggressive cost reduction.

Virgin Money will have its own banking licence. Customers with savings in both Nationwide and Virgin Money will benefit from the maximum £85,000 protection offered by the Financial Services Compensation Scheme both on their Nationwide and their Virgin Money accounts.

We have extended our Branch Promise by two years, meaning everywhere we have a Nationwide branch, we promise to still be there until at least the start of 2028. Over time, we will add Virgin Money’s branches to our existing network of more than 600 Nationwide branches.

In the meantime, we have extended our Branch Promise to Virgin Money’s existing branches. Even where we have a Nationwide branch and a Virgin Money branch close by, we promise to keep them both open until at least the start of 2028*.

* Subject to any circumstances beyond Nationwide’s control. Opening hours may vary. More details on our Branch Promise.

Nationwide’s leading levels of customer service will not suffer. This deal will allow us to invest even more in the service we know our customers and members want from us. That includes our branches, digital platforms such as our Banking app, and contact centres. Importantly, we will also continue to invest in fraud prevention and in our support for vulnerable customers.

Becoming a financially stronger Nationwide Group will improve our ability to maintain and improve these benefits. This year we launched another Fairer Share Payment for eligible members and an exclusive current account switching incentive for those members who don’t already have their main everyday bank account with us.

After this deal, we will be the second largest provider of mortgages and savings in the UK. We will be able to have an even greater impact in our communities up and down the country. We will continue to commit 1% of our profits to charitable activities for the good of society*.

* The 1% is worked out using average pre-tax profits over the previous three years.

The requirement to hold a vote is governed by the Building Societies Act 1986 and depends on the outcome of specific financial tests. These tests were fully considered and, because they were not met, the Board determined that a vote was not required by the Act. The Societies' own rules also mean that, as a result, the decision is for the Board to take on behalf of the Society.

Bringing the established business banking services of Virgin Money into the Nationwide Group will give us a broader and more diverse product range. This will make our income more resilient to economic changes and help protect the better interest rates on savings and borrowing that we offer.

It also means we can start to support small and medium-sized businesses more quickly and efficiently than developing these services ourselves. This is something our members have been asking for, and a third of small business owners said they would likely switch if there was a building society offering a competitive business banking account*.

* ‘Very likely’ and ‘Fairly likely’ responses combined. Research conducted by Censuswide, with a sample of 1,000 small business owners (15 to 19 April 2024).