Nationwide books £2.3bn gain on Virgin Money deal

(Sharecast News) - Nationwide has recorded a bigger-than-expected £2.3bn gain following its takeover of Virgin Money, the building society confirmed on Wednesday. The unusual acquisition of a listed lender by a member-owned building society completed on 1 October.

Chief executive Debbie Crosbie said the value of net assets acquired was "well above" the price paid, resulting in the £2.3bn gain.

She continued: "This gain provides significant headroom to cover our investment in integration, as well as in service and value."

Nationwide said the combined group CET1 ratio - a key measure of a bank's financial strength - was 19.6%, while the combined group leverage ratio was 5.4%. Both figures were "comfortably" above regulatory minimums, it added.

The update came as Nationwide posted interim results for the six months to 30 September. Total underlying income was £2.1bn, down on the previous year's £2.4bn, while underlying pre-tax profits fell to £959m from £1.3bn.

Nationwide attributed the decline to "the profile of interest rates over the period and our choice to offer competitive rates".

The Bank of England cut the cost of borrowing for the first time in over four years in August, by 25 basis points to 5%. It then trimmed rates again in November, with further reductions expected in 2025.

Nationwide's net interest margin was 1.5%. That compared to 1.66% a year ago and 1.46% in the second half of 2023/24.

Mortgage balances increased to £210.8bn from £204.5bn, giving it a market share of 12.6%, while deposit balances rose £8.3bn to reach £201.7bn.

Looking forward, Crosbie said the lender would take a "long-term, measured and fully-funded" approached to integrating Virgin Money.

She continued: "The economic outlook remains uncertain, and the interest outlook means we expect to have passed peak profitability.

"However, lower interest rates and resilience in real earnings are supporting consumer finances which, if maintained, should support a strengthening in housing market activity and overall deposit growth."