Sir Richard Branson and the US billionaire he bought Northern Rock from the government with are preparing to float the operation, rebranded as Virgin Money, in a move that could value it at up to £2bn.
Shorn of Northern Rock's toxic mortgages, which are still in the hands of the taxpayer, Virgin Money reported a quadrupling in underlying profits from £13m to £60m and gave the clearest indication yet that it intends to float on the stock market by appointing Glen Moreno as its chairman.
An increase in the provision for the amount that must be paid to the government in the event the business goes public was also taken as a sign that a float is on the way.
When Branson's Virgin Group, Wall Street billionaire Wilbur Ross and an Abu Dhabi investment fund acquired Northern Rock for £747m in 2011, they agreed to pay the Treasury £50m if they floated the bank on the stockmarket by 2016.
In accounts filed on Friday, the bank said it has added another £26m to its provision for a payment to the Treasury, taking it to £40m.
"This provisioning change reflects the view of the company's board of the possibility of an IPO," it said. It is also understood that Bank of America Merrill Lynch and Goldman Sachs have been appointed to handle a sale.
Virgin Money declined to comment on a potential float as it announced Moreno – chairman of publisher Pearson – will take over as chairman by the middle of next year.
Moreno, often cited as a potential candidate to chair a bank, was the acting chairman of UK Financial Investments, set up to manage the government's shareholdings in UK banks – including Northern Rock – in 2009.
He had already left before a deal was agreed to sell the operation to Branson and Ross. Virgin Group owns 46.5% of Virgin Money, with Ross holding 45% and the Abu Dhabi fund 6%, but it is understood that the two leading shareholders will only reduce their stake on flotation, rather than sell out completely.
The bank, which in its Northern Rock days was briefly the biggest mortgage lender in Britain, has returned to volume residential lending. In the first half of the year it advanced £2.5bn in loans, taking its total mortgage book to £20.3bn.
But this remains a quarter of the level before the bank imploded, with the controversial book of toxic 125% loans still in the hands of the taxpayer. Savings balances at the bank were flat at £21.1bn, which it said was owing to "falling rates across the market".
Northern Rock hit trouble largely because of a dependence on wholesale money markets to fund its mortgages, with its savings balances substantially below its loan book. Virgin Money said it is 85% funded by its savings balances, adding: "All lending is supported by a robust affordability and credit assessment."
Its chief executive Jayne-Anne Gadhia, is based in an office Edinburgh but with speculation mounting over the exit of banks from Scotland in the event of a 'yes' vote in next weeks referendum on independence, it played down any impact on the business.
Unusually for a trading update, the bank prominently stated that it is "incorporated in England" and that its registered office is in Gosforth, Newcastle upon Tyne.
Gadhia said: "Looking to the future, we are not burdened by the historical conduct and legacy challenges that face many incumbent banks. We have a powerful brand, a strong balance sheet, a strong core business franchise and through our ambition to make 'everyone better off', a clear set of values that live throughout our business.
For all these reasons, we remain confident that we can continue to make real progress on our quest to make banking better and can continue to grow our business strongly, profitably and responsibly."
Virgin Money employs more than 2,500 staff, with 1,700 people based at Gosforth and another 200 at Norwich. It said it currently has plans to create a further 250 jobs.
theguardian.com
Shorn of Northern Rock's toxic mortgages, which are still in the hands of the taxpayer, Virgin Money reported a quadrupling in underlying profits from £13m to £60m and gave the clearest indication yet that it intends to float on the stock market by appointing Glen Moreno as its chairman.
An increase in the provision for the amount that must be paid to the government in the event the business goes public was also taken as a sign that a float is on the way.
When Branson's Virgin Group, Wall Street billionaire Wilbur Ross and an Abu Dhabi investment fund acquired Northern Rock for £747m in 2011, they agreed to pay the Treasury £50m if they floated the bank on the stockmarket by 2016.
In accounts filed on Friday, the bank said it has added another £26m to its provision for a payment to the Treasury, taking it to £40m.
"This provisioning change reflects the view of the company's board of the possibility of an IPO," it said. It is also understood that Bank of America Merrill Lynch and Goldman Sachs have been appointed to handle a sale.
Virgin Money declined to comment on a potential float as it announced Moreno – chairman of publisher Pearson – will take over as chairman by the middle of next year.
Moreno, often cited as a potential candidate to chair a bank, was the acting chairman of UK Financial Investments, set up to manage the government's shareholdings in UK banks – including Northern Rock – in 2009.
He had already left before a deal was agreed to sell the operation to Branson and Ross. Virgin Group owns 46.5% of Virgin Money, with Ross holding 45% and the Abu Dhabi fund 6%, but it is understood that the two leading shareholders will only reduce their stake on flotation, rather than sell out completely.
The bank, which in its Northern Rock days was briefly the biggest mortgage lender in Britain, has returned to volume residential lending. In the first half of the year it advanced £2.5bn in loans, taking its total mortgage book to £20.3bn.
But this remains a quarter of the level before the bank imploded, with the controversial book of toxic 125% loans still in the hands of the taxpayer. Savings balances at the bank were flat at £21.1bn, which it said was owing to "falling rates across the market".
Northern Rock hit trouble largely because of a dependence on wholesale money markets to fund its mortgages, with its savings balances substantially below its loan book. Virgin Money said it is 85% funded by its savings balances, adding: "All lending is supported by a robust affordability and credit assessment."
Its chief executive Jayne-Anne Gadhia, is based in an office Edinburgh but with speculation mounting over the exit of banks from Scotland in the event of a 'yes' vote in next weeks referendum on independence, it played down any impact on the business.
Unusually for a trading update, the bank prominently stated that it is "incorporated in England" and that its registered office is in Gosforth, Newcastle upon Tyne.
Gadhia said: "Looking to the future, we are not burdened by the historical conduct and legacy challenges that face many incumbent banks. We have a powerful brand, a strong balance sheet, a strong core business franchise and through our ambition to make 'everyone better off', a clear set of values that live throughout our business.
For all these reasons, we remain confident that we can continue to make real progress on our quest to make banking better and can continue to grow our business strongly, profitably and responsibly."
Virgin Money employs more than 2,500 staff, with 1,700 people based at Gosforth and another 200 at Norwich. It said it currently has plans to create a further 250 jobs.
theguardian.com
No comments:
Post a Comment