Exclusive: Virgin Money IPO gets thumbs-up from investors as "big four" banks are slated by CMA

Emma Haslett
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After it postponed it citing market turbulence, investors have given an enthusiastic response to Virgin Money's IPO (Source: Getty)

Bankers working on the flotation of Virgin Money are likely to exercise their "greenshoe" option when it launches its initial public offering (IPO) later this month, City A.M. understands.

A source close to the deal said such has been the enthusiasm from investors for shares in the bank, it will sell an extra tranche of on top of the initial stake - originally mooted as 25 per cent - it had been planning to list.

The high level of investor interest should provide a boost to the confidence of the bank's management, who confirmed on Tuesday it was pushing ahead with its IPO plans, having postponed them in October citing market turbulence. In the same month, fellow "challenger bank" Aldermore pulled out of launching an IPO altogether.

But yesterday City A.M. learned it had lowered expectations for its post-IPO market cap to a range of £1.25bn-£1.45bn, from £1.5bn-£2bn.

The news came as the Competition Markets Authority (CMA) launched an official investigation into the practices of the "big four" banks. The CMO said today that the sector is failing customers through a "crippling lack of competition and transparency".

Although he did not comment on the IPO, a Virgin Money spokesman welcomed the investigation.

There is a lack of transparency in the current account market which makes it difficult for consumers to compare different accounts and shop around, which results in low switching levels and high market concentration.

Paul Pester, the chief executive of TSB, added that consumers had been "crying out" for an overhaul of the market.

The Big Four banks have had a stranglehold on the market for far too long.

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