Nationwide has pumped more than £1 billion into Virgin Money’s Clydesdale Bank to prop up the struggling Scottish lender, The Mail on Sunday can reveal.
The huge injection is far higher than the £650 million previously reported, and comes as Britain’s biggest building society prepares to absorb millions of customers from Virgin Money after a judge approved the transfer last month. It follows the mutual’s £2.8 billion takeover of Virgin Money in 2024, which created the UK’s second largest savings and loans group after Lloyds.
Nationwide, which has 16 million members, and Virgin Money are still separate brands but from April they will be part of the same financial powerhouse.
It is unclear how many of Virgin Money’s customers will become Nationwide members and qualify for its annual £100 ‘Fairer Share’ bonus payment.
Dealmaker: Nationwide’s Debbie Crosbie led the £2.8 billion tie-up with Virgin Money
But the growing amount of money being set aside to bolster Clydesdale’s financial position will raise concerns that Nationwide may have bought a much lower-quality business than it previously thought and will have to keep putting in more capital to bring it up to scratch.
Nationwide booked a £2.3 billion gain on the Virgin Money deal because the assets that it bought were valued at more than the purchase price. It has now emerged that Nationwide has had to pump money into Clydesdale Bank twice since its half-year results in June to stop its capital ratios from falling as a result of the buyout, according to Companies House filings.
These capital cushions are assets banks keep on their books to make them more resilient to financial shocks such as stock market crashes and economic downturns.
Most of the money pumped in to Clydesdale was used to bring its accounts in line with the more conservative approach of Nationwide. The rest covered a £250 million payment that tycoon Sir Richard Branson is set to receive for the continued use of his Virgin brand name over the next four years.
Clydesdale’s capital ratios – a key measure of financial strength – are among the lowest in the banking sector, whereas Nationwide’s are among the highest.
The building society’s chief executive Debbie Crosbie – a former senior executive at Clydesdale – has hailed the Virgin Money deal as a ‘unique opportunity’, which would take the mutual into business banking, diversify funding and ‘strengthen us financially’.
She has promised a gradual and measured approach to integrating Virgin Money but has yet to say how much it will cost to merge Virgin Money’s IT systems and improve its customer service.
Nationwide had previously faced criticism for not allowing members a vote on the Virgin Money takeover.
‘The way Nationwide has handled this transfer, and the general lack of transparency surrounding the integration of Virgin Money, is another example of why I think there should be greater member representation at a board level,’ said campaigner James Sherwin-Smith, who plans to stand for election to the mutual’s board.
He says it would be the first time in 20 years that a member candidate was on the ballot.
Nationwide said: ‘We allocate capital in the group to ensure the business remains appropriately capitalised and generates the best returns for customers.’
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