London: Virgin Money, part of Richard Branson’s Virgin empire, took big strides on Friday towards becoming a major British retail bank able to compete within a sector rocked by the financial crisis.
Virgin Money said it had agreed to buy regional private bank Church House Trust for £12.28 million (€13.7 million, $19.6 million).
It plans to use the lender as a platform to offer savings and mortgage products to customers under the Virgin Money brand, which is known for its popular credit card and insurance offerings.
The purchase is also seen as providing a platform for Virgin Money to buy an even bigger bank, providing true competition to Britain’s biggest retail lenders.
“The Church House Trust business offers us a strong platform for growth,” Branson said in a statement announcing the deal.
“Virgin Money aims to bring simplicity to the UK banking market which has traditionally been a complex sector,” he added.
Virgin Money said it would inject £37.3 million of new capital into Church House Trust.
Britain’s retail banking sector was thrown into chaos by the credit crunch, resulting in the nationalisation of Northern Rock and multi-billion-pound bailouts of Royal Bank of Scotland and Lloyds Banking Group.
LBG was created last year following a government-brokered deal to merge ailing HBOS bank with its stronger rival Lloyds TSB, while Virgin Money failed in a bid to buy Northern Rock before it fell into state hands.
“The financial crisis has tarnished the reputation of many UK banks,” Virgin Money chief executive Jayne Anne Gadhia said on Friday.
“Virgin Money will provide a better, different form of banking to its customers, increasing competition in the sector.”
Gadhia added: “Our approach to banking is founded on developing a sustainable, savings-based business. We see the acquisition of Church House Trust as a strong and sensible first step in delivering Virgin Money’s banking ambition.”
Meanwhile Church House Trust chairman David Batten said Virgin was set to benefit from the bank’s “conservative business model”.
Church House has about 3,000 private customers and £50 million in deposits — double its £25 million loan book.
Virgin Money has more than 2.5 million customers and already offers credit cards, as well as savings, investment and insurance products.
Virgin’s deal comes after finance minister Alistair Darling last year called for greater competition across Britain’s troubled retail banking sector.
Britain’s biggest retailer, supermarket giant Tesco, has made its own recent moves aimed at attracting more customers away from traditional lenders.
Last October, Tesco relaunched its financial services division as Tesco Bank.
Across Britain meanwhile, there has been widespread public anger over the global financial crisis and subsequent recession.
The country begins 2010 as the only top economy officially in recession after the eurozone, France, Germany, Japan and the United States last year each emerged from the most severe downturn since the 1930s.
However official data due later this month is expected to show that Britain returned to growth in the fourth quarter of last year.