Virgin Money, owner of the former Clydesdale Bank, has today confirmed that its acquisition by Nationwide Building Society remains on course to complete by the end of this year in a deal that that will generate millions for firms working with the two financial groups.
In what will likely be its final report as an independent publicly-listed company, Virgin Money said mortgage and business lending both fell in the third quarter of its financial year which ended on June 30. This was partially offset by an increase in unsecured lending driven primarily by higher credit card borrowing.
Virgin Money also revealed that it has already spent in the region of £10 million in fees related to the £2.9 billion takeover by Nationwide, which was announced in March. However, the bill is expected to be "significantly higher" during the rest of the year.
READ MORE: Virgin Money lending slows as Nationwide takeover looms
The deal, which will be the largest in UK banking since the financial crisis, will cost an estimated £80m in fees and expenses with Nationwide covering roughly £41m of the bill and the rest paid by Virgin Money. This includes legal and regulatory fees as well a hefty payments to Virgin Money advisors at Goldman Sachs and JP Morgan, along with Nationwide's advisors at UBS.
However, that won't be the end of it. While Nationwide has yet to spell out the full cost of combining the two businesses, it has indicated that further substantial investment will be required to bring Virgin Money's customer service and IT systems up to scratch.
"We need a sensible period of time to invest in [Virgin Money’s] customer service and integration," finance director Chris Rhodes told members at last month's annual general meeting.
READ MORE: Nationwide boss returns to Glasgow roots with Virgin deal
"There are challenges," he added. "Integration of Virgin Money and Clydesdale is not as full as we would like."
The plan is to run Virgin Money as a separate brand for four years with payments of at least £76m to be paid to its biggest shareholder, Sir Richard Branson, during that integration period. By the end of it, Nationwide chief executive Debbie Crosbie needs to have proven that this massive investment to create the UK's second-largest savings and loans group was worth the expense and effort.
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