Branson in the money after Virgin’s subdued float

Jayne-Anne Gadhia, chief executive of Virgin Money, with Sir Richard Branson. Picture: Reuters

Jayne-Anne Gadhia, chief executive of Virgin Money, with Sir Richard Branson. Picture: Reuters

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VIRGIN Money made a subdued debut on the stock market today, with the shares priced towards the lower end of the targeted range but still raising £140 million for its billionaire backers.

The float, which was postponed from last month because of choppy financial markets, valued the so-called “challenger bank” at £1.25 billion, and is ­believed to have raised £70m each for Sir Richard Branson and US financier Wilbur Ross.

Virgin Money, which is headquartered in Gosforth, Newcastle, and employs 200 in Edinburgh out of a 2,500-strong payroll, is raising £150m through the public listing.

Jayne-Anne Gadhia, chief executive of the bank, which bought the “good” parts of Northern Rock following that lender’s collapse in 2007, said: “I am ­delighted to welcome all our new shareholders to Virgin Money.

“Our capability to deliver growth at meaningful scale, the quality of our balance sheet and the fact that we are unburdened by legacy issues makes us stand apart from other banks, and these strengths give us the potential to ­deliver ongoing returns to our shareholders through both capital growth and progressive dividend payments.”

Gadhia said the completion of the initial public offering (IPO) would see Virgin Money make a final payment to the UK government of £50m as part of the £1bn-plus it paid to take over the profitable bits of the former taxpayer-owned Northern Rock.

The bank priced its shares at 283p – the bottom end of the 283p to 333p range it indicated last week after it revived plans for an IPO due to an ­improvement in stock market ­conditions.

Rival challenger bank Aldermore, which specialises in lending to small and medium-sized businesses as well as mortgages, cancelled its planned listing last month, citing volatile market conditions.

No date has been set for a revised flotation, while Santander UK, part of the Spanish banking giant, has said it will seek an IPO in the “medium-term future”.

Branson, whose other interests range from rail and aviation to telecoms, is expected to see his stake in Virgin Money fall to 34 per cent from 46.4 per cent.

Ross’s shareholding will come down to 33 per cent from 44.7 per cent.

Virgin Money is one of a number of new British lenders looking to break the dominance of the big four banks, which account for more than three-quarters of lending.

The Competition and Markets Authority has recently confirmed it is to investigate the current accounts and small business lending markets in Britain.

“We’ve got very significant future growth opportunities across retail banking and none of the drag that is difficult for some of our competitors,” Gadhia added.

Virgin Money provides mortgages, savings and credit cards to 2.8 million people. It has said it will use the money raised by the IPO to boost its share of the UK mortgage lending market to more than 3 per cent, and triple its credit card lending from £1bn to £3bn by 2018.

The price of the stock-market debutant was little changed in conditional dealings today before the formal start of trading in the shares next Tuesday.

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