Saturday, January 09, 2010

Branson's Virgin shakes up UK banking - 8th January 2010

Virgin Money, part of Richard Branson's Virgin empire, launched a shake-up of Britain's troubled retail banking market on Friday with the purchase of a private regional lender.

Virgin said it had agreed to buy Church House Trust for 12.28 million pounds ($A21.4 million) and would use the bank to offer savings and mortgage products to customers under the Virgin Money brand.

"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 pounds ($A58.25 million) of new capital into Church House Trust.

Britain's retail banking sector was thrown into chaos by the credit crunch, causing the nationalisation of Northern Rock and multi-billion-pound bailouts of Royal Bank of Scotland and Lloyds Banking Group.

LBG was meanwhile created last year following a government-brokered deal to merge ailing HBOS bank with its stronger rival Lloyds TSB.

"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".

Virgin's announcement comes as Britain's biggest retailer, supermarket giant Tesco, has made its own recent moves aimed at attracting more customers away from Britain's traditional banking sector.

Last October, Tesco relaunched its financial services division as Tesco Bank.

In Britain there has been widespread public anger over the global financial crisis and subsequent recession.

Britain 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.