Nationwide gains £2.3bn from Virgin Money takeover to ‘benefit’ customers

Nationwide Building Society said it has gained £2.3bn since buying rival bank Virgin Money, but reported a drop in profits as the benefit of higher interest rates faded and it dished out cash to members.

The building society said the value of Virgin Money, which it acquired in October, was well above the £2.8bn takeover price.

The tie-up marked the UK’s biggest banking merger since the financial crisis.

Nationwide’s chief executive Debbie Crosbie stressed that “future profits generated by Virgin Money can now be used for the benefit of customers, rather than being paid to external shareholders”.

Nevertheless, the building society reported a sharp drop in profits for the latest half-year period.

Its statutory pre-tax profit fell to £568m for the six months to the end of September, from £989m a year ago.

The group said this reflected its Fairer Share Payment of £100 to 3.85 million to eligible members in June.

It also reflected lower borrowing costs and its decision to offer competitive savings rates to customers, according to Nationwide.

Ms Crosbie added: “The economic outlook remains uncertain, and the interest rate outlook means we expect to have passed peak profitability.

“However, lower interest rates and resilience in real earnings are supporting consumer finances which, if maintained, should support a strengthening in housing market activity and overall deposit growth.”

Meanwhile, Virgin Money reported higher profits following efforts to cut costs across the business.

Its statutory pre-tax profit jumped to £558m for the year to the end of September, from £345m the prior year.

Virgin Money paused its restructuring plans after agreeing to be bought by Nationwide earlier this year, but said it still made cost savings of £187m over the past year.