UK’s Virgin Money Set for IPO


October 2, 2014

Virgin Money, the small United Kingdom bank formed from the collapse of Northern Rock during the financial crisis, has confirmed plans to list on the London Stock Exchange. Numerous sources are reporting the move this morning, with coverage from the Financial Times here.


Virgin Money are reportedly looking to raise a sum in the region of £150million from the IPO, with one third of that being returned to the British Government after it aimed to save Northern Rock back by nationalising it. The business had previously agreed when acquiring non-toxic assets for £747million in 2011 to pay the British Government £50million should an IPO be completed prior to 2016.


It is believed the bank has paid the British Government in excess of £1billion with all subsequent payments considered, and is looking for the IPO to value the business in the region of £2billion.


The bank will issue each of its 2,800 employees shares worth £1,000. Virgin follows TSB and One Savings Bank in pursuing an IPO this year, while several other small UK based banks, including Santander UK and Shawbrook, are exploring options for floats of their own next year.


Which of these banks see successful IPOs will likely depend on who is able to get theirs to market quickest. The Financial Times also reports that Virgin are looking to distribute up to 20% of profits after tax and interest towards securing further Tier 1 securities.


Virgin outperforms most of its competitors in terms of its common equity Tier 1 ratio, currently at 14.4%, and is aiming to realise a return on tangible equity at a similar level in 2016.


Among the securities held by Virgin include £1billion of credit card loans acquired from MBNA in 2013, and one business objective is to grow their interests in this area to £3billion by 2018. Other key objectives including growing market share of the UK mortgage market from its current 1.6%, and increasing the money customers hold at the bank, currently stood at £21.1billion.

The Chief Executive of Virgin Money, Jayne-Anne Gadhia, told the Financial Times, “Our capability to deliver growth at meaningful scale, the quality of our balance sheet and our absence of legacy issues makes us stand apart from other banks.”


Other banking institutions involved in assisting Virgin with the IPO include Bank of America Merrill Lynch, Goldman Sachs, and Barclays.

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