2007: Virgin Territory – David Leland
Virgin Money have agreed a price for Northern Rock. I’m not sure if Mr Branson is having a slight joke as the jumbo sized £747million is the pricetag agreed with the Government, who are intent on selling the nationalised banks back to the private sector as quickly as possible. There will be other funds that will need to be paid, £330m of them in total if the deal works out for Virgin.
Virgin Money have made no secret of their desire and attempt to revolutionise the world of high street banking. In theory this builds nicely upon their existing financial services range, however it remains to be seen whether the typical Virgin customer has sufficient funds to make Banking profitable in these more challenging economic times.
Virgin are purchasing the “good bank” part of Northern Rock, as with most things that Virgin do, very little are actually “virgin” in the sense that a business is invariably bought and rebranded as Virgin. The toxic element of Northern Rock will be left with the British taxpayer (naturally!).
The first half results for Northern Rock reveal continued losses, Executive Chairman Ron Sandler “Northern Rock has made good progress in the first half of 2011. The company continued to be loss-making,
[£78.8m] as expected, but losses are significantly reduced [£140m in first half 2010] and we are generating momentum. The company expects to begin trading profitably during the second half of 2012″. If to be believed, Mr Branson won’t have to wait too long to begin to see a profit on his investment.
I fear though that despite the regulators efforts to ensure that financial products are properly marketed and sold from 2012 that this may simply be another Bank that struggles to know what free really means. Currently employers can set up staff pensions “for free” using Virgin, which is of course a nonsense that they acknowledge that they will charge the employees via their pension. Admittedly the financial services industry needs knocking into shape, but many of the issues are rather more complex than simply a new coat of paint. Whatever your view about Virgin, it is undoubtedly a successful sales outlet, not simply selling products and services, but invariably the businesses themselves. The only reason not to sell is when the profits show little sign of diminishing, which then perhaps tells us rather more about what is really being offered. As the regulator seems in the mood for fines, I do hope that Mr Branson got his caveat emptor.
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