Nationwide Building Society, a prince of the financial world since 1884, today said it would spend £2.9 billion (billion!) of members cash on Virgin Money.
We can assume Nationwide boss Debbie Crosbie is not a customer of Virgin Money, or she’d know it is worth nothing like that. (I am one. Christ.)
Nationwide is selling this deal as if it were a continuation of its mutual principles.
Advisers include three bankers from UBS, four from JP Morgan, four from Goldman Sachs and a bunch of highly paid PR folk.
Which doesn’t exactly scream of mutuality.
This is not Nationwide coming to the rescue of a small building society – it’s a massive bet on an expansion plan absolutely no one was asking for accept presumably Debbie Crosbie.
I regard Nationwide’s write-down on the value of this deal in next year’s results as a matter of inevitability. The guys at Goldman Sachs shall rub their hands in glee. Anything else we can do for you nice folks?
Raise you a bit of equity perhaps?
The point about mutuality, indeed the very definition of the word, is that everyone is in it together.
From the statement: “Virgin Money customers would not automatically become members of Nationwide.”
So a whole new class of customers has been created. Which makes claims that this will lead to a “more diverse, modern mutual” entirely hollow words.
Some more: “Nationwide does not intend to make any material changes to the size of the Virgin Money employee base in the near term.”
So in the medium term, bad luck Virgin dudes, thanks for everything.
One person who does do well is Sir Richard Branson, whose Virgin Group gets £414 million from the sale. In true mutual fashion, of course.
The other point about this deal is that it cuts competition. There is now one fewer lender in the mortgage market. Which means the cost of mortgages goes up and the value of savings goes down.
Crosbie is an entirely likeable, entirely skilled executive.
This is an awful deal.
