Virgin Money eyes Co-op Bank after profits surge

Challenger bank Virgin Money has said it would look at potentially snapping up parts of troubled rival Co-operative Bank as it revealed annual profits leapt by a third.

Virgin Money chief Jayne-Anne Gadhia is mulling a 'strategic opportunity' after Co-op Bank was put up for sale. Picture: Neil Hanna

Jayne-Anne Gadhia, chief executive of the Edinburgh-headquartered lender, said the Co-op Bank sale was a “strategic opportunity”, but added Virgin Money had not yet made any approach.

Co-op Bank, which has four million customers, was put up for sale earlier this month amid mounting concerns over its capital position.

It has struggled to recover after its near-collapse in 2013 following the discovery of a £1.5 billion black hole in its finances and it was forced into a painful debt for equity swap, which left it majority controlled by US hedge funds.

It is not clear if Virgin Money would be interested in buying all or part of Co-op Bank.

Gadhia told Reuters: “The bank has not approached anybody in Co-op Bank yet ... but at some point we will look at this strategic opportunity.”

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She later added that the group remains “confident in our plans for organic growth and our philosophy regarding acquisitions is unchanged”.

“We consider potential opportunities that are a good fit with the business, value accretive and within our prudent risk appetite,” she said.

TSB’s Spanish owner Sabadell is also said to be interested in buying Co-op Bank.

Gadhia’s comments came as Virgin Money, which is 35 per cent owned by Sir Richard Branson, posted a 33 per cent rise in underlying pre-tax profits to £213.3 million for 2016.

The group, which floated on the stock market in 2014, said its customer base rose 15 per cent to 3.3 million after it signed up more than 35,000 new customers a month thanks to strong take-up through its digital channels.

Net mortgage lending rose 20 per cent to £4.3 billion as it took an 11 per cent market share, while it said retail savings increased by 12 per cent to £28.1bn.

The group also notched up a 55 per cent surge in credit card lending to £2.4bn, boosting its market share to 3.5 per cent, and said it is on track to hit its £3bn target by the end of the year.

Virgin Money said the Brexit vote had not directly impacted the business, but said “the eventual timing and nature of the UK’s exit from the EU remains unclear and the longer-term impact on the economy is uncertain”.

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