Branson enters the UK banking market

News - Banking

Written by Ray Clancy

Monday, 11 January 2010 09:45

Entrepreneur Richard Branson is entering the UK banking market after his company Virgin Money bought regional bank Church House Trust for £12.3 million.

Virgin will inject £37.3 million into the bank, using it as a basis for its long-stated ambition to develop a retail banking business in the UK. It may even bring the brand to the High Street.

Richard Branson’s bank would be a trusted deposit taker and mortgage lender at a time when the financial crisis has tarnished the reputation of many UK banks, Jayne Anne Gadhia, chief executive of Virgin Money, said.

‘The really positive thing for us is that over the last two years which have seen such problems in the financial sector we've seen growth, both in terms of the business and profitability but in staff numbers and job security,’ she added.
Church House Trust will offer products under the Virgin Money brand. Virgin emphasised that Church House Trust had no reliance on wholesale markets for funding and no borrowing from other banks.
‘The Church House Trust business offers us a strong platform for growth. Virgin Money aims to bring simplicity to the UK banking market which has traditionally been a complex sector,’ said Branson.

Somerset-based Church House has about 3,000 private customers and £50 million in deposits, double its £25 million loan book, but it has no national branch network.

But the Virgin Money brand could be seen in the High Street. ‘We’ll also work to launching what we’re thinking of as Virgin Money shops with personal service from an old-fashioned bank manager or manageress,’ explained Gadhia. The first one could be open by the end of the year.
‘We’re not talking about creating a huge network quickly but I think as we do develop and as we want to be a different force in banking in future, it’s something we’ll build on over time,’ she added.

She also revealed that buying stricken bank Northern Rock has not been ruled out. Virgin had been a front-runner to acquire the bank before it was nationalised in February 2008. On January 1 this year the government split the savings and mortgage arm of Northern Rock from its toxic loans to create a "good" and "bad" bank before offering it up for sale.
‘There are a number of government assets up for sale and, indeed, a number of other assets up for sale from other players. We’ll look at all of them as they become available and figure out whether they make sense from an economic point of view, from a business plan point of view and from the point of view of our customers,’ said Gadhia.

Virgin Money, which began life as Virgin Direct in 1995, saw its turnover rise from £77 million to £98.5 million at the end of 2008 with profits rising by £4 million to £24.4 million.

Church House has offices in Yeovil, Leeds and London and traces its history to 1792, when West Country solicitor Edmund Batten founded private bank Batten & Co alongside his legal practice.

David Batten, chairman of Church House Trust, said: ‘Church House Trust’s conservative business model has proven to be attractive to Virgin Money as a sound base from which to fulfil its banking ambitions.’