VIRGIN Money is gearing up to launch a current account before the end of June after delivering its first underlying profit since taking over Northern Rock two years ago.
The Edinburgh-based lender, backed by Sir Richard Branson, is also growing increasingly confident that it could float within the next two years, according to its latest annual report.
Chief executive Jayne-Anne Gadhia said the current account systems were being tested by the firm’s staff ahead of its public launch, which is expected in the first half of this year.
Gadhia – who saw the value of her pay package surge almost 35 per cent to £1.2 million last year – added: “We are confident that we can continue to make real progress on our quest to make banking better, growing our business strongly, profitably and responsibly.”
Virgin Money paid the UK government almost £1 billion for collapsed mortgage bank Northern Rock in a deal that gave it 75 branches, about one million customers and 2,100 employees.
A spokesman for the bank, which employs about 200 people in Edinburgh out of a UK-wide workforce of more than 2,750, said its initial move into the current account arena would be a basic offering, with no overdraft facilities, but subsequent products in the range would provide more features.
Tesco Bank is also poised to launch its current account this year, but fellow Edinburgh-based supermarket group lender Sainsbury’s Bank has ruled out such a move.
Virgin has not set a timetable for an initial public offering (IPO), but the spokesman said a flotation “is on the agenda”. Under the terms of the Northern Rock takeover, the Treasury was in line for an extra payment of up to £50m following a “successful, profitable” float or sale between 2012 and 2016.
The amount payable reduces over time, falling to zero by 2017, but Virgin Money’s annual report shows it has now set aside £14m – up from £5m in 2012 – “reflecting the board’s view of the increased possibility of an IPO before 2017”.
The lender is controlled by Branson’s Virgin Group and Wall Street billionaire Wilbur Ross, who has also invested in Bank of Ireland. The Abu Dhabi Investment Corporation has a minority stake in the business.
Virgin Money reported an underlying profit of £53.4m for 2013, against a loss of £2.5m the previous year, boosted by market-beating growth in its savings and mortgages books. Retail savings balances soared 17 per cent to £21.1bn – in excess of market growth of 5 per cent – while mortgage balances expanded 17 per cent to £19.6bn, far above the 1 per cent seen in the wider market.
Gadhia said: “During the year, we maintained the strong momentum that we have established in our core mortgages and savings business, while investing in building the banking capabilities which will enhance our future growth potential.”
The group, which created 250 permanent jobs last year, also reported “good progress” in the development of its credit card business, following last year’s £1bn acquisition from MBNA.
The deal was described as “transformational” by Gadhia, who said it would enable the firm to “grow strongly”.