13:23: Nationwide should approach Virgin Money rebranding with caution - GlobalData
Commenting on Nationwide’s plan to rebrand Virgin Money, GlobalData banking and payments analyst Phoebe Hodgson said: “Nationwide’s preliminary deal to acquire Virgin Money will see the building society take on an extremely loyal and satisfied customer base. GlobalData’s Financial Services Consumer Survey shows Virgin Money’s unusually high loyalty rate, with 94% of customers unlikely to switch providers. Furthermore, 90% say they are satisfied with Virgin Money’s brand.
“This indicates Nationwide is at risk of losing customers if they rebrand too quickly and disrupt customer satisfaction. Nationwide has stated it intends to integrate both banks and retire the Virgin Money brand within the next six years. While planning to do so, Nationwide should focus on providing the most competitive rates and enhanced digital services to ensure Virgin Money’s strengths are not diminished.”
11:01: House prices rise for fifth consecutive month - Halifax
Outside the Nationwide news, Halifax published its latest house price index figures - with average house prices rising for the fifth consecutive month in the a row in February, going up by 0.4%.
Property prices, meanwhile, grew by 1.7% on an annual basis - down 2.3% on last month - with the typical UK home now costing £291,699, around £1,000 more than last month.
Commenting on these figures, Halifax Mortgages’ director Kim Kinnaird said: “In fact, the average price tag of a home is now only around £1,800 off the peak seen in June 2022. While it is encouraging that we’ve seen growth in recent months, what happens next remains uncertain.
“Although lower mortgage rates, alongside expectations of Bank of England interest rate cuts this year, should help buyer confidence in the short term, the downward trend on rates is showing signs of fading.
“Even with growing wages and inflation falling back, raising a deposit and affording a sizeable mortgage remains challenging, especially for those looking to join the property ladder, so it remains apossibility that there could be a slowdown in the housing market this year.”
10:53: "Mid-tier banks must exercise caution" when aspiring to "truly rival the Big 4 in the UK" Conister Bank
Investigating what the £2.9bn deal could mean for consolidation in the UK banking sector, Conister Bank’s managing director Douglas Grant said: “With the stock market continuing to undervalue banks and share buy backs not necessarily creating the share price movement the bank expected then using their spare capital on accretive acquisitions makes sense – so this might be the time for consolidation in the industry.
“We have seen in the last few years these middle tier banks finding themselves in quite a bit of financial trouble trying to compete with the Big 4, whether it’s here in the UK (the Co-op) or in the US (Silicon Valley Bank, Signature Bank and First Republic Bank). They need to specialise in the products they sell, so Nationwide you think of mortgages, Shawbrook, you think of SME lending – so gaining more market share in your specialist market would make sense from a consolidation perspective.
“Also, there have been abortive disposals from the incumbents over the last few years, you only need to look at NatWest/RBS’s failures (Williams & Glyn for example), so we would expect they are mulling over a trade sale of some of their operating entities.
“Should these mid-tier banks aspire to truly rival the Big 4 in the UK, they must exercise caution. The prospect of heightened regulatory scrutiny and stronger opposition from the Big 4 could pose challenges, particularly concerning the utilisation of their clearing license or engaging in price competition, especially if the mid-tier banks lack a clearing license.”
10:37: Acquisition would create second largest mortgages and savings provider in the UK
In a statement made to shareholders earlier today, Virgin Money said the acquisition would create the second largest mortgages and savings provider in the UK, with approximately £366.3bn in total assets and £283.5bn in total lending and advances.
In its statement, Virgin Money’s chief executive David Duffy said: "This potential transaction with Nationwide represents an exciting opportunity to build on the significant progress we have made in becoming the only new Tier 1 bank in recent history. The combined scale and strength would expand our customer offering and complete our journey in the banking sector as a national competitor."
10:27: Deal would see see Virgin Money brand eventually disappear
According to theBBC, the agreement reached between Virgin Money and Nationwide would see the former’s brand disappear by 2026. The combined two would also create a group with 696 branches - second only in the UK to Lloyds Banking Group.
The 220p-a-share price offered by Nationwide is also 38% higher than Virgin Money’s closing share price price yesterday, with the bank "minded to recommend it" to shareholders.
10:12: Nationwide "considering making an offer" to acquire
The biggest news of the day broke this morning as it’s been widely reported Nationwide has agreed terms to takeover Virgin Money worth £2.9bn.
However, in a statement from the building society’s chairmanKevin Parry said - while it’s "considering" making an offer to acquire the business, there’s "no guarantee" that it’ll make a firm offer, nor that it would be accepted by Virgin Money’s shareholders.
10:00: Welcome back
Welcome back toCredit Strategy’s Live Blog, here we will give you the latest news from the credit and financial services industry for Thursday 7 March. Here, we will be giving you update to the minute coverage on:
- Nationwide’s proposed purchase of Virgin Money
- Halifax’s latest house price index
- Further reaction to yesterday’s Budget
As well as all the other big news to break throughout the day.
