Nationwide to invest in Virgin Money to improve customer service and IT systems

Nationwide has warned it will have to invest funds to improve Virgin Money’s customer service and IT systems.

Britain’s largest building society, owned by 16 million members, is buying the listed lender for £2.9bn.

The deal – the biggest in the UK banking sector since the financial crisis – has been criticised by some members after they were denied a vote on the plan.

Nationwide says the purchase will give it access to business banking, cheaper financing and lender profits.

The firm plans to operate Virgin Money as a separate brand for at least four years, paying tycoon and largest shareholder Sir Richard Branson at least £76m for the privilege, while gradually integrating the two lenders.

But the partnership, led by chief executive Debbie Crosbie, declined to specify the cost of combining the two businesses.

Members yesterday challenged Nationwide to justify the deal, which will create the second-largest savings and loans group after Lloyds.

Virgin Money joined forces with Clydesdale Bank and Yorkshire Bank in 2018.

“We need a reasonable period of time to invest in customer service and integration (of Virgin Money),” Chief Financial Officer Chris Rhodes told the annual meeting, which was held exclusively online.

“There are challenges,” he added. “The integration of Virgin Money and Clydesdale is not as complete as we would like.”

The news will come as a surprise to some insiders because Crosbie’s knowledge of Virgin Money and its leadership was intended to make the deal less risky.

Crosbie worked for 22 years at Clydesdale, the latter years as interim chief executive, but left in 2019 after the company merged with Virgin Money and she lost the top job.

He said “a huge amount of careful consideration” had been given to the risks and opportunities of the purchase.

Nationwide was “confident” that it would more than cover the costs of the integration, he said.

She declined to comment on the decision, revealed by The Mail on Sunday, to close the account of Mikael Armstrong, who led the fight to give members a say over the Virgin deal, saying: “We would never take away anyone’s banks for their legally held views.”

Fewer than 300 people tuned in to the event, less than half the number who attended in person 20 years ago, one member said.