Nationwide Building Society considered bidding for the Co-operative Bank, TSB and Metro Bank before tabling its controversial £2.9 billion takeover tilt at Virgin Money, chief executive Debbie Crosbie has said.
Crosbie revealed that the society had been looking for potential deals before she was appointed to the role in December 2021 after running TSB, owned by Spain’s Sabadell. “Virgin was by far the most compelling because the financial benefits to our members were stand-out,” she said.
Nationwide’s chief executive has made very few public remarks about the audacious takeover, but she spoke last week as the society reported that its profits for the year to April 4 had dropped by 20 per cent to £1.8 billion.
The takeover has sparked controversy because the 16 million members of the society were not granted a vote on the deal. Virgin Money shareholders — who did get to vote last week, with 89 per cent supporting the acquisition by Nationwide — also seem to be selling out at a low price, according to analysts, raising questions about why they have accepted the deal.
Crosbie argued that Nationwide was making a £1.5 billion gain on the takeover because Virgin Money’s assets are valued at £4.4 billion, while it is paying £2.9 billion for the bank.
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She is preparing to spell out the deal’s financial benefits for Nationwide members ahead of July’s annual meeting — and has upgraded her forecasts. Crosbie had originally expected to tell members that the society would make a 12 per cent return on the purchase price. But that estimate has now been raised to 17 per cent because of higher forecasts for Virgin Money’s profits this year.
She said the £1.5 billion gain “will be used to help our members in the future” and that the Virgin deal would allow Nationwide to “shift the dial over a long period time”, as well as making the society “more sustainable” by having another way to generate profits.
Crosbie said that the £500 million or so of annual profits generated by Virgin Money could be used to support “fairer share” payouts to Nationwide’s members each year. It started these last year, with £340 million shared between 3.4 million eligible customers. Next month, the society is giving £100 to some of its members at a cost of £385 million.
“Really simple maths” meant that the Virgin Money profits would cover similar payments to Nationwide members in the future, she added. “We’re very focused on what’s the right move to make the society sustainable over a longer period.”
Nationwide is unlikely to take formal control of Virgin Money until the final quarter of this year while legal processes are completed, but Crosbie said she did not intend to move quickly to cut costs or jobs during the integration. Instead, she explained, the “number-one priority” would be “improving the customer service”.
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Nationwide members would also have access to business banking expertise as a result of the deal, she added. “There’s been a lot of feedback over many years from Nationwide members saying they’d like the society do do business banking.”
