North Rock in Private Eye Nov 2011

Just how good a banker is Richard Branson?

Well he’s not really a banker at all, according to the latest figures from his Virgin Money group, which will soon be replacing the Northern Rock name on the high street.

Virgin Money is a credit card business run in association with MasterCard and real banks such as Bank of America and until recently, Royal bank of Scotland. For 2010 it had a turnover of £74m, on which it made a pre-tax profit of £42.5m. Its income from loan business was just £156,000.Virgin Bank, formerly Church House Trust, acquired for £13 million, plus the existing unit trust, ISA and insurance business, is to be found in Virgin Money Holdings (UK), the parent also of Virgin Money. Banking produced revenues of just £1.2 million last year out of £91 million. These were dwarfed by the credit card income and by £28 million from “investment and protection”.

Banking produced a first year loss of £2.7 million (Church House was acquired for its banking licence; Virgin deposits were previously held at RBS), whereas the group profit was £36.5 million. There were further losses of £12 million due in part to “building a retailing banking platform”. Virgin Bank is in effect a start-up, as indicated by a loan book of just £21 million and total banking assets of £134 million.

The main UK parent for the Branson bank is Virgin Financial Services UK Holdings. Its cash flow statement showed an outflow of cash from operating activities in 20120 of £75 million, plus another £11 million on capital expenditure and investment. That hole was largely filled by Branson’s American partner, financier Wilbur Ross, who injected £96.5 million in return for 22 per cent of Virgin Money Holdings.

The Ross investment came from America’s home grown tax haven, the state of Delaware. But then the Virgin banking business, including now Northern Rock, all goes back to the equally tax-efficient British Virgin Islands, and those Branson discretionary family trusts.

 Does the lack of Virgin banking experience suggest that Northern Rock is seen more as an investment than a career, with the aim of selling off in part, via a flotation, or whole to a bigger rival sooner rather than later at a profit – unlike the government?

If anyone disputes the financial data we’d be happy to hear from them….

Chancellor has signed a bad deal for taxpayers with Northern Rock sale

Michael Stephenson, General Secretary of the Co-operative Party, said:



Today the Chancellor has signed a bad deal for the future of Northern Rock. George Osborne has missed a real opportunity to return the Rock as a new mutual, which would have signalled the government had learnt crucial lessons from the banking crisis. The sale to Virgin is a resurrection of the failed former model. This fire-sale demonstrates Osborne is not willing to think long term about how banks can serve their customers and reduce risk for taxpayers.

Lost opportunity in Northern Rock sale

The news today that the Government has sold our bank to Virgin Money is a great disappointment and a lost opportunity.

The deal in my view significantly undervalues the long term worth of a newly capitalised bank with few poor debts.

The price of £747 million plus perhaps further bonus payments is more about the Chancellor being able to make a political statement about Government getting out of the banking business than a fair deal for all.

And even at that price it should be remembered that it’s based on having expropriated our shares – something that didn’t happen to RBS or Lloyds. Maybe this was because they had more friends in high places in the City than we did.

The opportunity that’s been missed is to allow Northern Rock to have returned to the mutual sector and remain focussed on its historical role – financing homes for ordinary people.

No doubt the name will be swept away and replaced by one which has been used for cola, wedding dresses and a plethora of unsuccessful business activities.

It’s a sad day for all of us in the North East of England.


Robin Ashby