Comment: Virgin money | Wonga

IT IS peculiarly un-Branson-like for Virgin Money to announce a flotation with no retail component. Few brands are as omnipresent and recognisable to the person on the Edinburgh tram or Clapham omnibus. A proportion of the new shares made available to the public would have given a populist tailwind to the offer.

Martin Flanagan

However, it seems Sir Richard, so often a business maverick with strong public relations antennae, has leant towards pragmatism this time with an offer limited to “certain institutional investors” rather than attempt to make a big splash with a slice of the action for private investors.

That could be because a relatively small amount of money – £250 million – is being raised in the initial public offering (IPO), while the free float of 25 per cent after the flotation will still leave the main owners, Branson and US billionaire Wilbur Ross, firmly in charge.

Branson’s Virgin Financial Investments currently owns 46.5 per cent of Virgin Money, with WL Ross owning 44.9 per cent.

And, even if private investors are disappointed, there is a pleasing symmetry about the affair. Virgin Money will pay £50m to the Treasury under the terms of its purchase of Northern Rock in 2011, more than three years after the building society-turned-bank collapsed.

So the taxpayer gets all its money back from the Rock bailout, while in a roundabout way it marks the business’s return to the stock market, and Virgin Money staff get £1,000 of new shares each.

The well-respected Virgin Money chief executive Jayne-Anne Gadhia becomes the first woman to head a publicly listed UK bank, and it helps keep the momentum going of new competitor banks getting more financing options through a listing.

TSB and OneSavings came to the stock market earlier this year, and Aldermore, Santander UK, Metro Bank and Williams & Glyn all have float preparations at various stages.

After the fizz of flotations die away, it is still good news for bank customers that the big established banking players in the UK are far better capitalised now, and that they have the rising competition from new players with more financing flexibility to keep them honest.

Wonga loan appetite reined in by regulator

WONGA’s regulatory black eye looks to be something of a defining moment for society’s previously ambiguous attitude towards payday lenders. The Financial Conduct Authority has forced the short-term lender with sometimes dizzying interest rates for some of Britain’s worst-off people to write off £220 million of loans for about 330,000 borrowers who are in 30 days’ arrears or more, and scrap the fees and charges for another 45,000. The FCA’s move is draconian, but Wonga only has itself to blame. Affordability checks by the company on its customers seemed to have been far too patchy for the regulator’s liking.

Some will question whether Wonga even has a future in the new climate for payday lenders. Andy Haste, the group chairman parachuted in to try and salvage the company last July, certainly seems to accept the FCA judgment, saying there is “much to do in order to make Wonga a sustainable and accepted business”.

Wonga has said it will green-light fewer loan applications in future, and that some existing borrowers may no longer be able to use its service under tighter lending criteria, even if it means the business becomes less profitable. That’s a good, practical start.