Terry Murden: Will it be third time lucky for Branson's banking dream?

SIR Richard Branson has revealed his hand as the bidding hots up for the 600 branches that Lloyds Banking Group is being forced to sell. He hopes it will be third time lucky.

Branson was knocked back in his attempt to acquire Northern Rock three years ago when the government nationalised it. Then he was outbid in the auction for 318 branches sold by Royal Bank of Scotland.

The Virgin boss lost out on both occasions because his bids were too low, so this time he'll have to dig a little deeper into the company's coffers or else see his hopes of building a banking empire suffer a severe setback.

Make no mistake, a lot rests on this deal. Virgin Money, which will also have another tilt at Northern Rock, has ambitious plans for its fledgling Edinburgh-based operation, currently offering a range of simple retail products such as credit cards and insurance.

Jayne-Anne Gadhia, the chief executive of Virgin Money, already has plans to open 70 branches but she needs to acquire scale quickly and that will only come with a significant acquisition. Buying the Lloyds branches would instantly provide Virgin with a 5 per cent market share of current accounts and turn Virgin Money into the sixth biggest bank in Britain.

Branson himself has admitted it would take 15 years to create a business of a similar size and after buying a tiny private bank in the west country that provided him with a banking licence he is now garnering support from US and UK investors to raise 3 billion.

It's a bold step, even for the adventurous Branson. Virgin has 2.5 million customers but no branches and servicing a bank doesn't come cheap, particularly with the more demanding requirements on capital reserves. Gadhia has spoken of a flotation of Virgin Money as a necessity in order to raise more capital.

Acquiring 600 branches, including 185 in Scotland, would give it instant high street presence, which itself has its critics. In an age of online banking there are those who doubt the need for a bricks and mortar portfolio. However, after years of branch closures there have been some moves in the other direction. HSBC, for instance, is opening branches in Scotland. It may be that the banks have finally got the message that the customer actually likes to look his bank manager in the eye.

Branson is likely to launch his bid in July and attention is now focused on who will join him. The usual list of suspects includes National Australia Bank, owner of Clydesdale. Acquiring the Lloyds assets would be tranformational for NAB, which has flirted with expansion in the UK for too long. It can't seem to decide whether it wants to be in or out, but it would have the clout to launch a serious offer.

Airdrie Savings Bank branches out

AMONG the other banking news last week was the decision by Airdrie Savings Bank to open a branch in Falkirk, its first outwith Lanarkshire since it was formed 175 years ago.

General manager Jim Lindsay, having a Neil Armstrong moment, said "the distance is not great but it is a big step for the bank". One small step for the Airdrie, one giant leap for the independent banking sector...

Anyway, the bank is now on its way into the wider world and is looking at other sites across the country. Mind you, the board first looked at moving to Falkirk 15 years ago and has only just made a decision. As president Bob Boyle told me last week, the Airdrie has been opening branches at a rate of one every 25 years.

Those local authorities begging the bank to come to their area shouldn't expect a phone call any time soon.When going with the flow doesn't add up

THAT old mantra "turnover is vanity, profit is sanity" still rings true, but those small companies struggling to get by also know that profit is not cash and that they can show a profit without having any money at all.

It's one thing to register a sale in the accounts, quite another to extract payment from a customer. Poor cash flow is probably the biggest single cause of company failure and is usually a result of customers delaying the payment of bills.

Businessman Ken Lewandowski is hardly a pioneer in wanting legislation that will force companies to pay up, but some mechanism needs to be in place that will ensure firms get what they are due.