Richard Branson’s Virgin Money launched its assault on the UK retail banking market today after agreeing a deal to buy regional bank Church House Trust.
Virgin, which will use the bank to offer savings and mortgages products to customers under the Virgin Money brand, will pay £12.3m (€13.7m) for Church House and pump £37.3m (€41.7m) in capital into the business.
Branson said: “The Church House Trust business offers us a strong platform for growth.
“Virgin Money aims to bring simplicity to the UK banking market which has traditionally been a complex sector.”
Virgin Money - which failed in its efforts to buy now-nationalised Northern Rock two years ago - already offers savings, credit card and investment products to around 2.5 million customers.
But the acquisition of Somerset-based Church House – cleared by the Financial Services Authority – gives it the platform to move into deposits and mortgages and boost the scale of the business through further deals.
Church House is a conservatively-run bank boasting around 3,000 private customers and £50m (€55.8m) in deposits – double its £25m (€27.9m) loan book.
The deal also answers a call from British Chancellor Alistair Darling last year for more competition in the sector after many players were struck by the financial crisis.
There are currently only four major players in the UK market following Lloyds TSB’s rescue of HBOS, although politicians hope the branches being sold off by HBOS and Royal Bank of Scotland as a condition of state support will encourage competition, as well as the eventual return of Northern Rock to the private sector.
Virgin Money said the crisis had “tarnished the reputation” of many UK banks and “created the opportunity for a new entrant to provide a better, different form of banking to its customers”.
Church House, which has offices in Yeovil, Leeds and London, traces its history back as far as 1792, when West Country solicitor Edmund Batten founded private bank Batten & Co alongside his legal practice.
This bank was swallowed up by a series of mergers but the partners of Battens solicitors formed the Church House Trust in 1987 to handle the financial needs of private clients.
Church House, which made pre-tax profits of £450,000 (€503,043) in 2008, is spinning off its investment arm, CHI, to management as part of the deal.