Virgin Money’s flotation on the Stock Exchange proves the decision to save Northern Rock at the start of the financial crisis was right, the bank’s chief executive has said.
The bank which has its headquarters in Newcastle yesterday confirmed its much-anticipated intention to float on the London Stock Exchange, with the Treasury set to get £50m from the deal.
Staff at the bank will each get £1,000 worth of shares.
The decision to float means the bank will have handed over £1bn to the Government, with chief executive Jayne-Anne Gadhia saying the latest financial contribution means the taxpayer would not be losing out from its 2007 bail-out of Northern Rock.
The move comes just a few weeks after Virgin Money said underlying profits had jumped to £59.7m in the first half of the year, and Ms Gadhia said the transformation of the business was a testament to its staff in Newcastle.
“We had everybody together in Gosforth for the announcement and it was just great for everybody who has worked so hard to get us into this place,” she said.
Virgin Money, which acquired part of Northern Rock in 2011, said the move - expected to raise around £150m for the company - will support growth plans, provide access to more capital-raising options and improve its ability to recruit, retain and incentivise management and employees.
Ms Gadhia said: “These strengths give us the potential to deliver ongoing returns to our shareholders through both capital growth and progressive dividend payments.”
After it was nationalised, Northern Rock was split in two, with most troublesome parts remaining taxpayer-owned through UK Asset Resolution.
The National Audit Office’s review of the sale to Virgin Money found it was the best way to prevent more losses, but that taxpayers faced losses of at least £2bn from the continued state ownership of the rest of the troubled bank.
Since the acquisition, Virgin Money has increased mortgage balances from £14.1bn to £20.3bn, while deposit balances have increased from £16.3bn to £21.1bn.
The company, which has 2.8m customers and 75 stores, has also acquired £1bn of credit cards from MBNA and recently launched its first personal current account. In the current financial year, it reported an underlying profit of £59.7m, compared to £53.4m in 2013.
Outgoing chairman David Clementi said: “I am pleased we reached the point where Virgin Money is ready to start life as a listed company.
“The company has an extremely positive future and I am delighted the business is in such a good position.”