Nationwide’s £2.9bn takeover of Virgin Money looks to be a shrewd deal, says ALEX BRUMMER

Britain’s challenger banks are going down like ninepins. In many ways this is a great shame because the services offered by the big four lenders are deteriorating and branch closures have left small businesses and private customers feeling isolated.

As Virgin, Tesco and other newcomers joined the fray, it seemed like there was a new dawn.

I know of at least one local business that would have collapsed if not for the services of Anne Boden and Starling Bank.

Virgin Money’s journey has been fascinating. It all started with the task of bringing Richard Branson’s marketing skills to stifling finances.

He then became a consolidator, purchasing most of the remains of Northern Rock and, in 2018, Clydesdale and Yorkshire.

Therein lies a connection. Debbie Crosbie was in Clydesdale before traveling via TSB to Nationwide.

By the standards of recent FTSE 350 offerings, the 40 per cent premium offered by Nationwide (putting Virgin Money at £2.9bn) does not look generous.

London-listed companies sell at deep discounts and Virgin Money has the penalty of being a bank, with most selling at fractions of their book value.

There are factors that complicate the situation. Nationwide will have to dip into reserves, which are owned by members, to raise cash for the deal. The contract with the Virgin brand will run for several more years and cost £17 million.

Virgin Money customers can at least be assured that, as a mutual, Nationwide should be a kinder, gentler landlord than the alternatives.

The addition of 3 per cent of the mortgage market and 8.6 per cent of credit cards will make Nationwide the second largest retail lender in the UK.

Crosbie has made its mark on Nationwide with a stylish rebrand and a firm commitment to sustaining a branch network that needs care and attention.

As a building society, you need to control costs and build capital. But it doesn’t face the same short-term pressures to recoup investment as its listed competitors.

If Crosbie can improve services and maintain a parallel branch network, it could be a competitive force for good.

Barring outsiders, Nationwide appears to be making a shrewd deal. But size is no excuse to set aside mutual standards.

halo effect

As a creative force, Britain’s leading commercial channel, ITV, has few rivals.

There can be no better demonstration of the value of ITV Studios, the top earner in 2023 with £2.2bn of revenue, than Bates vs The Post Office.

At its peak, it generated 14 million viewers. It is going strong on the ITVX streaming platform and, despite its eccentric Britishness, has been sold in 12 overseas markets.

The studios are on a roll with ‘faction’ while two other productions, the drama After the Flood and the pandemic-themed Breathmaking, are attracting plaudits and multimillion-dollar audiences.

However, last year’s financial results were disappointing, with pre-tax profits falling 41 per cent to £396 million in 2023.

After the harsh light shone on ITV over alleged bad behavior on This Morning and Love Island, chief executive Carolyn McCall now has a much better narrative.

He is confident that a new Talent Code, designed to enforce improved standards, will work.

As the best place in the UK to attract mass market advertising, ITV suffered from the struggling economy last year.

Inflation is now falling, growth is back on the agenda and this year offers more opportunities, with Euro 2024 a big plus for the second quarter: especially if Harry Kane and Jude Bellingham continue to score.

The £160m investment in ITVX had given the broadcaster a much-needed streaming presence. Even more studio production is the way to go.

Katie’s goodbye

Doubling up on CEOs in the boardroom never really works. Stuart Machin has dominated at M&S, leaving his colleague and digital genius Katie Bickerstaffe in the shadows. She leaves in July.

The announcement, on the eve of International Women’s Day, does not come at the best time.