VOTE now! Proposed take over of Virgin Money - Nationwide members should be given a vote

26left

Millyonare said:

PosterBoy77 said:

masonic said:

It's been widely reported that Nationwide intends to phase out the VM brand, so all this talk of an IT integration seems to be a red herring. What would make most sense, and what would be kindest in the circumstances, would be to turn off the life-support machine as soon as practicable. That would involve a migration rather than an integration.

This itself does not seem that likely. The main justification for Nationwide buying VM is apparently to get into Business Banking, and taking on the Business Banking customers. These accounts offer facilities that Nationwide don't offer within their own systems. It would in the very least require a migration and enhancements to their systems.

Business banking only makes up about ~10% of VM total revenues. Paying nearly £3b for less than £0.2b of biz revenue is nuts.

Totally agree. The letter from the Nationwide Chairman that arrived this week said very little and parroted the same unsubstantiated claims.

• "create a financially stronger building society with a larger customer and deposit base" - What about the lower capital position and the higher costs that will be incurred from the integration and restructuring work that will follow given it will be undertaken "over several years"?
  
  
• "acquire a strong personal lending business and credit card range" - Nationwide offers both of these products today. Are they suggesting the other VM business lines aren't strong?
  
  
• "This acquisition will bring the established business banking services of Virgin Money" - this could have been grown organically or they could have purchased a specific business bank.
  
  
• "bigger branch network" - makes reference to the Branch Promise to maintain Nationwide branches until the start of 2028 - but no reference to protecting Virgin Money's network.

I remain unconvinced of the merits of this deal - and it doesn't seem to matter what paper your read, they're of a similar opinion.

• Unwise dash by Nationwide: Building Society risks alienating its members over Virgin deal (Alex Brummer, Daily Mail)
• Nationwide buying Virgin Money is an awful deal (Simon English, The Standard)
• Nationwide members deserve a vote on Virgin deal – but won’t get one (Nils Pratley, Guardian)
• Nationwide is buying Virgin Money, but what’s in it for members? (Jill Treanor, The Sunday Times)
  
• Nationwide has a lot to lose in its unwise bet on Virgin Money (Philip Augur, Financial Times)
  
• Nationwide has finally revealed its true colours – and it’s not pretty (Ben Marlow, The Telegraph)
  

WillPS

26left said:

I remain unconvinced of the merits of this deal - and it doesn't seem to matter what paper your read, they're of a similar opinion.

• Unwise dash by Nationwide: Building Society risks alienating its members over Virgin deal (Alex Brummer, Daily Mail)
• Nationwide buying Virgin Money is an awful deal (Simon English, The Standard)
• Nationwide members deserve a vote on Virgin deal – but won’t get one (Nils Pratley, Guardian)
• Nationwide is buying Virgin Money, but what’s in it for members? (Jill Treanor, The Sunday Times)
  
• Nationwide has a lot to lose in its unwise bet on Virgin Money (Philip Augur, Financial Times)
  
• Nationwide has finally revealed its true colours – and it’s not pretty (Ben Marlow, The Telegraph)
  

3 of those are not offering an opinion on the merits of the deal, they're offering a commentary on the timing and lack of a ballot (The Mail, Guardian and Sunday Times). In fact, The Sunday Times piece is quite balanced and offers some positivity about the deal itself.

26left

WillPS said:

26left said:

I remain unconvinced of the merits of this deal - and it doesn't seem to matter what paper your read, they're of a similar opinion.

• Unwise dash by Nationwide: Building Society risks alienating its members over Virgin deal (Alex Brummer, Daily Mail)
• Nationwide buying Virgin Money is an awful deal (Simon English, The Standard)
• Nationwide members deserve a vote on Virgin deal – but won’t get one (Nils Pratley, Guardian)
• Nationwide is buying Virgin Money, but what’s in it for members? (Jill Treanor, The Sunday Times)
  
• Nationwide has a lot to lose in its unwise bet on Virgin Money (Philip Augur, Financial Times)
  
• Nationwide has finally revealed its true colours – and it’s not pretty (Ben Marlow, The Telegraph)
  

3 of those are not offering an opinion on the merits of the deal, they're offering a commentary on the timing and lack of a ballot (The Mail, Guardian and Sunday Times). In fact, The Sunday Times piece is quite balanced and offers some positivity about the deal itself.

So entirely relevant within the context of this thread…

WillPS

26left said:

WillPS said:

26left said:

I remain unconvinced of the merits of this deal - and it doesn't seem to matter what paper your read, they're of a similar opinion.

• Unwise dash by Nationwide: Building Society risks alienating its members over Virgin deal (Alex Brummer, Daily Mail)
• Nationwide buying Virgin Money is an awful deal (Simon English, The Standard)
• Nationwide members deserve a vote on Virgin deal – but won’t get one (Nils Pratley, Guardian)
• Nationwide is buying Virgin Money, but what’s in it for members? (Jill Treanor, The Sunday Times)
  
• Nationwide has a lot to lose in its unwise bet on Virgin Money (Philip Augur, Financial Times)
  
• Nationwide has finally revealed its true colours – and it’s not pretty (Ben Marlow, The Telegraph)
  

3 of those are not offering an opinion on the merits of the deal, they're offering a commentary on the timing and lack of a ballot (The Mail, Guardian and Sunday Times). In fact, The Sunday Times piece is quite balanced and offers some positivity about the deal itself.

So entirely relevant within the context of this thread…

Sure, but not within the specific presentation of "I remain unconvinced of the merits of this deal - and it doesn't seem to matter what paper your read, they're of a similar opinion". Your statement gives the casual impression that you've provided 6 newspaper links which are critical of the deal. Half those, it turns out, are not; one of which is behind a paywall - so it serves the discussion to point out they offer no backing for your concern as to the merit of the deal.

WillPS

Millyonare said:

PosterBoy77 said:

masonic said:

It's been widely reported that Nationwide intends to phase out the VM brand, so all this talk of an IT integration seems to be a red herring. What would make most sense, and what would be kindest in the circumstances, would be to turn off the life-support machine as soon as practicable. That would involve a migration rather than an integration.

This itself does not seem that likely. The main justification for Nationwide buying VM is apparently to get into Business Banking, and taking on the Business Banking customers. These accounts offer facilities that Nationwide don't offer within their own systems. It would in the very least require a migration and enhancements to their systems.

Business banking only makes up about ~10% of VM total revenues. Paying nearly £3b for less than £0.2b of biz revenue is nuts.

Good job there's another 90% or so of the business they're acquiring doing broadly similar things to the stuff they already do then, otherwise they'd be paying about 10x too much.

Beddie

Regarding the IT issues, yes, Virgin Money are a bit of a mess with legacy accounts. However I have accounts on their "modern" system (82 sort code) and they work fine. Better than Nationwide, who have a very clunky and dated platform.

So I think Nationwide know they have to upgrade their own system and will get all the VM legacy accounts onto that once complete. In other words they will have to spend the money anyway.

As for the merger, it may be a mess, it may be a benefit, it'll probably be a bit of both. Makes no material difference to me or any other Nationwide member.

gt94sss2

masonic said:

PosterBoy77 said:

masonic said:

It's been widely reported that Nationwide intends to phase out the VM brand, so all this talk of an IT integration seems to be a red herring. What would make most sense, and what would be kindest in the circumstances, would be to turn off the life-support machine as soon as practicable. That would involve a migration rather than an integration.

This itself does not seem that likely. The main justification for Nationwide buying VM is apparently to get into Business Banking, and taking on the Business Banking customers. These accounts offer facilities that Nationwide don't offer within their own systems. It would in the very least require a migration and enhancements to their systems.

With the mess VM's systems are well known to be in, that would be a sensible way forward. Nationwide was already looking to move into this sector, so they may already have been working on their internal systems to accommodate this. There is much we do not know.

Many may not know (or have forgotten) that Nationwide were given £50m of taxpayer money to launch business banking a few years ago in an attempt to increase competition in the sector.

They ended up returning the money..

https://www.thisismoney.co.uk/money/smallbusiness/article-8203729/What-went-wrong-425m-fund-designed-fund-new-wave-business-banks.html

wmb194

Millyonare said:

wmb194 said:

Millyonare said:

eskbanker said:

Millyonare said:

eskbanker said:

Millyonare said:
And they don't seem to have a handle on IT integration (different legacy systems).

But on what basis are you and others concluding this, and contending that you know better?  Of course their offer documents refer to the need to conduct the integration projects, which will start by developing and refining understanding from what can be determined prior to offering, but in itself that doesn't support the apparent assertions that they don't know what they're doing?

Plenty of IT experts in the industry press quoted as saying VM's IT systems are a mess. Nationwide will spend years and years unravelling the digital spaghetti -- and then knitting it all back together again.

It's a high price paid for a struggling second-tier bank with a sprawling mish-mash of struggling legacy brands and legacy IT systems.

As the old saying goes... an eagle plus a turkey doesn't make an eagle 😉

https://www.computerweekly.com/news/366573297/Nationwide-IT-infrastructure-poised-to-absorb-Virgin-Money

https://www.ft.com/content/2aff65fe-d435-4520-bfbb-d5e086a56543

I'm not necessarily disagreeing with any of that, but as readily available material in the public domain it misses the point, in that I'm simply challenging the apparent contention that this is all new information that NW won't be aware of!  Hence my original question:

Surely the question here isn't whether the IT integration would be risky and expensive, but by how much (if any) would it be more risky and expensive than the NW board understands

Sounds like semantics.

NW has already overpaid for VM (excessive PE ratio). If they can't get the un-complicated finance right, what chance of getting the complicated IT right. They've over-estimated the value of VM. It's not a stretch to believe they’ve under-estimated the tech mess of VM.

Time will tell, of course. But 70-90% of mergers fail (mostly) because of over-paying and under-integrating. NW has already ticked 1 of those 2 boxes.

It’s the book value that counts with banks not the P/E ratio. Nationwide might have ideas on how to address the ‘E’ anyway e.g., synergies. Through all sorts of misjudgments, this isn’t to say that these sorts of corporate actions don’t have a long history of destroying shareholder value though.

No major investors have cared about book value since forever. VM has been trading under book value for years. It's a nerdy accounting exercise, not a real-world valuator.

VM has sold at double or triple the PE of most of its major peers. For a struggling second-tier bank with plunging profit margins and soaring loan provisions, the price is way too high.

They certainly have but we’re getting off topic.

Section62

gt94sss2 said:

masonic said:

PosterBoy77 said:

masonic said:

It's been widely reported that Nationwide intends to phase out the VM brand, so all this talk of an IT integration seems to be a red herring. What would make most sense, and what would be kindest in the circumstances, would be to turn off the life-support machine as soon as practicable. That would involve a migration rather than an integration.

This itself does not seem that likely. The main justification for Nationwide buying VM is apparently to get into Business Banking, and taking on the Business Banking customers. These accounts offer facilities that Nationwide don't offer within their own systems. It would in the very least require a migration and enhancements to their systems.

With the mess VM's systems are well known to be in, that would be a sensible way forward. Nationwide was already looking to move into this sector, so they may already have been working on their internal systems to accommodate this. There is much we do not know.

Many may not know (or have forgotten) that Nationwide were given £50m of taxpayer money to launch business banking a few years ago in an attempt to increase competition in the sector.

They ended up returning the money..

https://www.thisismoney.co.uk/money/smallbusiness/article-8203729/What-went-wrong-425m-fund-designed-fund-new-wave-business-banks.html

I mentioned it back on page 3 of this thread.

As well as the £50m funds they had to return, Nationwide wrote off an additional £20m of member's money which had been spent trying to get the project off the ground.

The excuses given related to Covid and the slashing of the BoE base rate.  But it was claimed that cost savings would make the decision cost-neutral after about two years.

26left

The petition is now nearing 500 votes which is the minimum required to call a Special General Meeting under Section 14 of the Nationwide rules. 

https://www.change.org/p/give-nationwide-members-a-say-on-the-purchase-of-virgin-money