Virgin Money revives IPO

The flotation of Virgin Money, part-owned by Sir Richard Branson, is back on after being delayed from last month.

Stabilisation in the stock market and clarity from the Bank of England about how much capital the bank should hold, has allowed the management team, led by Jayne-Anne Gadhia, to restart the sale process.

Gadhia, who is in line for a share award as a result of the initial public offering, said: “Given this [clarity from the Bank of England] and given more stable market conditions, we now plan to move forward with our IPO with the aim of being admitted by the end of November.”

The bank has 75 branches as result of the acquisition of the “good” part of Northern Rock in 2011. As a result of the stock market flotation, taxpayers are in line for £50m and the bank’s 2,800 staff on track for a free share handout of £1,000 each.

Virgin Money’s leverage ratio – a measure of how much capital a bank should hold – is 3.8%, higher than the 3% minimum set by the Bank of England’s financial policy committee last week.

“We welcome the clarity provided by the financial policy committee on the leverage ratio, and are pleased to note that we operate in excess of the recommended requirements. Given this and given more stable market conditions, we now plan to move forward with our IPO with the aim of being admitted by the end of November,” Gadhia said.

Virgin Money is 47% owned by Branson with the US investor Wilbur Ross owning about 45% and the rest held by other investors.

The sale is being kickstarted at a time when National Australia Bank has also said it would consider the flotation of its UK banks, Clydesdale and Yorkshire.

Santander, the Spanish bank, had considered floating its UK arm as long ago as 2011 but delayed any sell off as a result of the banking crisis. Javier Marin, chief executive of Santander, said yesterday (tues) that any flotation would not take place “this year or next” as the Spanish bank published third quarter results showing that the UK business made up 20% of its profits.

Profits in the UK rose by £200m to £1bn in the nine months to the end of September, compared with the same period a year ago, and Santander said its UK business had attracted one in four current accounts switched through the new seven-day switching service which was launched a year ago.

The UK business is now being run by Nathan Bostock after Ana Botin moved to take the helm of the eurozone’s largest bank following the death of her father, Emilio, in September.

Unlike its rivals in the UK, Santander did not take a fresh provision for payment protection insurance mis-selling but, as with its rivals, benefited from a 33% fall in bad debts. It said that competition in the mortgage market was increasing and that “there is evidence of stronger competitive pressures in many segments which may impact margins and slow the rate of growth in corporate lending”.