Nationwide Building Society has revealed a £2.3billion gain from its acquisition of Virgin Money, with the mutual pledging to use future profits to benefit customers rather than external shareholders.
The landmark deal saw Nationwide acquire Virgin Money for £2.8billion in October.
Nationwide’s chief executive Debbie Crosbie emphasised that the value gained from the takeover would be channelled directly into customer benefits, marking a significant shift from Virgin Money’s previous shareholder-focused model.
Despite the merger gains, Nationwide reported a significant drop in half-year profits, with statutory pre-tax profit falling to £568million for the six months to September, down from £989million a year earlier.
The merger is set to create approximately 500 new jobs across call centres and IT operations
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The decline partly reflected the building society’s commitment to member benefits, including its Fairer Share Payment of £100 to 3.85 million eligible members in June.
Lower borrowing costs and competitive savings rates for customers also contributed to the reduced profits.
The mutual saw strong growth in customer deposits, with balances increasing by £8.3billion during the half-year period, driven by increased savings activity.
While mortgage lending showed signs of improvement as interest rates began to decrease, Nationwide noted that affordability remains a challenge for homebuyers.
Crosbie said: “The economic outlook remains uncertain, and the interest rate outlook means we expect to have passed peak profitability.”
The merger is set to create approximately 500 new jobs across call centres and IT operations, as part of Nationwide’s investment in improving Virgin Money’s customer service.
In a significant commitment to maintaining physical banking presence, Nationwide confirmed it would not continue Virgin Money’s previous restructuring efforts, which had seen about 30 per cent of its branch network close in the past year.
Nationwide has pledged to maintain its branch network, promising not to leave any town or city where there is currently a branch until at least 2028. This stands in stark contrast to Virgin Money’s previous strategy, which had reduced its branch network to 91 locations before the takeover.
Crosbie highlighted the advantages of the mutual model, stating: “This is the benefit of the mutual model – we’re not having to drive costs down to pay shareholders, all of the profits stay for customers.”
Chris Rhodes, who transitioned from Nationwide’s finance chief to Virgin Money’s chief executive, provided further assurance about branch preservation, confirming: “We won’t be restructuring the branch network.”
Rhodes explained that while the company would seek to optimise costs through sensible decisions on buildings, they wouldn’t face the same cost pressures as Virgin Money did as a listed business.
