Virgin Money warns of ‘headwinds’ ahead of £2.9bn takeover
The group is putting some restructuring activity on hold due to its impending takeover by Nationwide Building Society.
Your support helps us to tell the story
From reproductive rights to climate change to Big Tech, The Independent is on the ground when the story is developing. Whether it's investigating the financials of Elon Musk's pro-Trump PAC or producing our latest documentary, 'The A Word', which shines a light on the American women fighting for reproductive rights, we know how important it is to parse out the facts from the messaging.
At such a critical moment in US history, we need reporters on the ground. Your donation allows us to keep sending journalists to speak to both sides of the story.
The Independent is trusted by Americans across the entire political spectrum. And unlike many other quality news outlets, we choose not to lock Americans out of our reporting and analysis with paywalls. We believe quality journalism should be available to everyone, paid for by those who can afford it.
Your support makes all the difference.Virgin Money has warned of “headwinds” from interest rate cuts and said it will face cost pressures as it pauses some restructuring efforts ahead of its £2.9 billion takeover.
The high street lender – which agreed in March to be bought by rival Nationwide Building Society – reported an 18% rise in pre-tax profits to £279 million for the six months to March 31.
But it said it is braced for its net interest margin – a key performance measure for retail banks – to be lower over the second half ahead of expected interest rate cuts and ongoing competition in the sector.
It also said costs are being pushed higher by rising wage bills and wider inflation, with limited scope to offset because the group is putting some restructuring activity on hold due to its impending takeover.
Nationwide has made pledges over retaining branches as part of its acquisition, saying it would keep a branch in each location where the combined group is present, until at least the start of 2028.
Virgin Money has not announced any further branch cuts as a result this year, while it also held fire on previously-announced plans to cut staff numbers further.
The group reduced its full-time workforce by around 150 in its first quarter and had said in a trading update earlier this year that there would be more staff cuts.
While we expect there to be headwinds through the second half of the year, we remain well placed to deliver growth in our target segments
Virgin Money also said fees related to the takeover will be “significantly” higher in the second half than in the first six months, adding to cost pressures.
Chief executive David Duffy said: “As we look out in to the second half, the group does expect downward pressure on net interest margin relative to the first half.
“We also anticipate cost pressures from inflation and investment in the second half, which will only be partially mitigated by the ongoing cost savings programme, where certain restructuring activities have now been deferred in light of the proposed acquisition by Nationwide.”
He added: “While we expect there to be headwinds through the second half of the year, we remain well placed to deliver growth in our target segments.”
The group’s half-year figures showed total customer lending edged 0.3% higher to £72.7 billion in the first half.
It is still expecting the Nationwide deal to complete in the final three months of 2024.
But the Competition and Markets Authority (CMA) recently revealed it is investigating the takeover.
It has invited interested parties to give their views, setting a deadline of June 14 for responses.