Virgin Money seeks £2bn to buy branches

FLEDGLING bank Virgin Money has kicked off a £2bn fundraising exercise to stockpile the war chest it requires to buy the branches being put up for sale by Lloyds and Northern Rock.

Sir Richard Branson’s financial services firm is in talks with potential investors over the provision of finance for a bid.

Both Lloyds and Northern Rock will be selling batches of branches to bidders over the coming year.

Led by Jayne-Anne Gadhia, Virgin Money has been in talks with private equity firms in the United States and Europe. It is also said to be in talks with wealthy individuals over possible investment opportunities.

Investment bank Greenhill has been appointed to oversee the process.

Virgin Money has had a long-stated ambition to expand in the UK, and has been linked as a potential bidder for the branches of Lloyds and Northern Rock that are to be sold.

American investor Wilbur Ross has already given financial backing to Virgin Money, with a £100m cash injection and a pledge to invest a further £500m.

The rest of the cash to fuel the firm’s acquisition war chest would come from the fresh round of talks with potential investors.

Management at Virgin Money are said to be keen on securing strong enough tier one capital before making an approach for the branches.

Established banks have scrambled to improve their financial buffers as regulators clamp down on the stability of lenders.

As many as 600 branches will be sold by Lloyds by the end of this year for as much as £3bn, whilst a sale decision on Northern Rock’s 70 branches could come as early as next month.

A rival bid to Virgin Money could come from City grandee Lord Levene’s NBNK, which is said to have appointed UBS to advise it on an approach.

Other bids could come in from US private equity house JC Flowers and National Australia Bank, which already owns the Clydesdale and Yorkshire banks.