Virgin Money swings to profit, no current plans for IPO

Matt Scuffham
A logo at a branch of Virgin Money bank is seen in the City of London
A logo at a branch of Virgin Money bank is seen in the City of London March 6, 2013. Virgin Money bought troubled British bank Northern Rock in 2012 for 747 million GBP. REUTERS/Toby Melville

By Matt Scuffham

LONDON (Reuters) - Virgin Money on Tuesday reported its first profit since acquiring failed lender Northern Rock in 2012, but its chief executive played down expectations that it would float on the stock market any time soon.

Chief Executive Jayne-Anne Gadhia said the group, which made an underlying profit of 53.4 million pounds ($89.3 million) in 2013, will pursue an initial public offering (IPO) when market conditions are right and the business is ready.

"We have no specific plans for an IPO at the moment. It remains our long term intention to float the business but we haven't appointed bankers yet," Gadhia told Reuters.

Analysts expect Virgin Money, which is backed by Richard Branson, to be worth up to 2 billion pounds. It was one of several British banks investors anticipated would float on the stock market in the next couple of years.

The government is also expected to sell its remaining 33 percent stake in Lloyds Bank this year.

Some investors had questioned whether there would be sufficient appetite in the market to digest all of the share issues. Other banks preparing for an IPO include Santander UK and TSB.

Gadhia said Virgin Money wanted to establish a "good track record in results" and to be offering a full range of services before listing. The bank is working on a "soft launch" of personal current accounts and plans to offer them nationwide by the end of 2014.

"At that point, we can consider where we're at and work out the right timing with respect to the market, competitors, politics and everything else," she said.

Virgin Money, which agreed to buy nationalised Northern Rock for an initial fee of 747 million pounds in November 2011, must pay more to Britain's finance ministry if it floats the business before November 2016, under the terms of that deal.

The bank was Britain's third-biggest net mortgage lender last year behind Barclays and Nationwide.

Its retail savings balances grew by 17 percent to 21.1 billion pounds, well ahead of overall market growth of 5 percent. Mortgage balances grew by 17 percent to 19.6 billion pounds, compared with overall market growth of 1 percent.

Gadhia said Virgin was picking up business from Britain's 'big 4' banks - Lloyds, Royal Bank of Scotland, Barclays and HSBC - and the Co-operative Bank which has been hit by a 1.5 billion pound capital shortfall and a drug scandal involving its former chairman.

"We definitely see people coming to us from RBS, Barclays Lloyds and HSBC, probably in that order and, definitely, customers coming over from the Co-op," she said.

Virgin Money has 75 branches and is opening new lounges in city centres which can be used by customers and their guests and which feature complimentary refreshments and free Wi-Fi alongside sections to service Virgin Money products online.

It has opened three so far - in Edinburgh, Norwich and Manchester - and plans to open two more later this year in London and Glasgow.

(Reporting by Matt Scuffham; Editing by Clare Hutchison and Mike Collett-White)