Payment/Compensation to Virgin Account Holders re sale to Nationwide

Nebulous2

I think the position has been covered very well by previous posters, and I don't want to go into ownership, simply the foreign currency transactions. 

 As said there are a lot of alternative options if you get the foreign exchange free benefit removed from your Virgin card. 

Nationwide does have foreign exchange free purchases on their credit card. I've used it quite a lot. It doesn't go as far as some other cards, and doesn't allow charge free foreign currency withdrawals from ATMs, but it is an option to apply for that if you stick with Nationwide.

Woodstok2000

Essex123 said:

Woodstok2000 said:

Essex123 said:

Woodstok2000 said:

Virgin had assets of £5bn. That doesn't mean it was worth £5bn to a buyer.  The deal involved a significant premium on the share price, so from that perspective you might say Nationwide paid over the odds.

Nationwide paid a premium over the undisturbed share price, but they still paid substantially less than the value of Virgin’s net assets.  

Hence on closing they paid approx £2.8bn and booked an immediate gain of £2.3bn.  The booking of this gain implies that Nationwide agreed the value of the net assets acquired, otherwise they would have written them down in line with their accounting policies. 

I don't think anyone is questioning the valuation of the assets, but £5bn in assets does not mean your business is worth £5bn. VM were struggling to deliver growth, particularly in mortgages, and were suffering from a funding disadvantage versus larger banks, which meant they had thinner margins.

They were historically off target on below-the-line costs, and in the year prior had  announced a plan to invest a further £130m in cybersecurity, which had not been expected by the market and so was not in forecasts. Consequently, the profits they generated were well below where they needed to be.

A business is only worth what someone is willing to pay for it...

Total assets of VM were much higher than £5bn (e.g all of the mortgage lending would have been classed as assets on their balance sheet).  The £5bn was net assets and as part of the acquisition Nationwide would have assessed the value of these assets (likely ranging from cash to intangible assets) to them and adjust the value if necessary. 

This article gives a good background.

https://www.theguardian.com/business/2024/nov/27/nationwide-gain-virgin-money-takeover

To be able to report a £2.3bn gain on acquisition using their own accounting methodologies shows anything but overpaying.

That's all true, but it still doesn't mean that VM was worth £5bn on the open market.

This article is a bit old, but the fundamentals still apply and it's a  really good insight into why banks often trade at a discount to asset value:

https://lightbulbmoment776997292.wordpress.com/2021/01/04/why-are-banks-trading-at-a-discount-to-its-net-asset-value/

MyRealNameToo

EllieDog said:

I am interested in Forum members views in the aspect of Virgin Money making a payment to its account holders following its sale to Nationwide. This is due to be formally completed in April.
The reasons I raise this question are
!. Virgin were paid 2.8 Billion for its sale
2. Nationwide gained 2.3 Billion when Virgin Money was valued at 5.1 Billion
3. As a thankyou to its account holders/ members for enabling it to make the purchase by adding money through their accounts Nationwide gave each of them a £50  
The only parties that have not received anything for this sale are the Virgin Money account holders who are the most affected by this sale. As with Nationwide it is the customers of Virgin Money who have raised the value of the bank enabling it to be sold for 2.8 Billion. No account holders. No Bank
I am directly impacted by this sale. I live in Enniskillen, Northern Ireland and opened a Virgin account to avail of no fees on foreign exchange as I frequently cross the boarder into Ireland. I have made numerous purchases in Ireland using the Virgin Debit Card saving quite a bit of money as a result.
Virgin say that there will be no 'immediate' changes to account terms and conditions but I note from another forum thread that the licence to use the Virgin brand by Clydesdale and Yorkshire Banks was due to expire in 2028.
I have looked at Nationwide and found that the no exchange fees perk is only available on fee paying accounts. I and others opened accounts with Virgin Money because their terms and conditions suited our circumstances. We have now been sold to Nationwide. 
To add insult to injury, as Martin and his Team will be aware, Nationwide are now offering a £175 inducement to open an account. No doubt his is financed from their 2.3 billion windfall from the purchase of Virgin Money.
I realise there may be no legal requirement for Virgin Money to pay compensation to its account holders but is there a moral obligation?    

No, you got whatever benefits you got by being a customer. You took no material risk and got what you should have.

The shareholders who have sold their shares will be the ones that get the monies paid, they are the ones that took the risk by buying the shares which could have crashed to 0 if the bank failed or could be bought at a premium if it was successful. Thats why the proposal goes to the shareholders to vote on not customers. 

No terms are set in stone forever, all products can be withdrawn with appropriate notice. It's probably more likely that things will change after an acquisition but plenty have changed/withdrawn products without being bought. My business account was to be fee free as long as cash transactions were low, that product was withdrawn and moved onto a new product with a monthly fee. Now a few years later again they have dropped the monthly charges again. 

If you want to benefit from the purshase/sale of businesses then you need to be a shareholder not a customer. Your capital however is at risk

penners324

Open an account with Starling, Chase or Monzo if you want a good exchange rate debit card.

They could have been opened in the length of time it took to write that.

Whats being a customer of Virgin got to do with their buy out value? Nobody has been short changed

Essex123

Woodstok2000 said:

Essex123 said:

Woodstok2000 said:

Essex123 said:

Woodstok2000 said:

Virgin had assets of £5bn. That doesn't mean it was worth £5bn to a buyer.  The deal involved a significant premium on the share price, so from that perspective you might say Nationwide paid over the odds.

Nationwide paid a premium over the undisturbed share price, but they still paid substantially less than the value of Virgin’s net assets.  

Hence on closing they paid approx £2.8bn and booked an immediate gain of £2.3bn.  The booking of this gain implies that Nationwide agreed the value of the net assets acquired, otherwise they would have written them down in line with their accounting policies. 

I don't think anyone is questioning the valuation of the assets, but £5bn in assets does not mean your business is worth £5bn. VM were struggling to deliver growth, particularly in mortgages, and were suffering from a funding disadvantage versus larger banks, which meant they had thinner margins.

They were historically off target on below-the-line costs, and in the year prior had  announced a plan to invest a further £130m in cybersecurity, which had not been expected by the market and so was not in forecasts. Consequently, the profits they generated were well below where they needed to be.

A business is only worth what someone is willing to pay for it...

Total assets of VM were much higher than £5bn (e.g all of the mortgage lending would have been classed as assets on their balance sheet).  The £5bn was net assets and as part of the acquisition Nationwide would have assessed the value of these assets (likely ranging from cash to intangible assets) to them and adjust the value if necessary. 

This article gives a good background.

https://www.theguardian.com/business/2024/nov/27/nationwide-gain-virgin-money-takeover

To be able to report a £2.3bn gain on acquisition using their own accounting methodologies shows anything but overpaying.

That's all true, but it still doesn't mean that VM was worth £5bn on the open market.

This article is a bit old, but the fundamentals still apply and it's a  really good insight into why banks often trade at a discount to asset value:

https://lightbulbmoment776997292.wordpress.com/2021/01/04/why-are-banks-trading-at-a-discount-to-its-net-asset-value/

Clearly not £5bn on the open market as otherwise the shares would not have been at a discount.  

Nationwide as a mutual is not subject to the same market scrutiny (and arguably short-termism) as listed rivals so they’re arguably in a better position to book the day 1 gain and then invest in quietly transforming the business.  On the flip side, I do feel there is a democratic deficit at Nationwide - theoretically the board are accountable to members but practically there is no substantive way to challenge the decisions of the board.

It would be interesting to have a crystal ball and see where an independent VM would be trading now.  For years BARC was trading well below TNAV but it’s had quite the run over the last couple of years and must be pretty much trading at book now.  

Woodstok2000

Essex123 said:

Woodstok2000 said:

Essex123 said:

Woodstok2000 said:

Essex123 said:

Woodstok2000 said:

Virgin had assets of £5bn. That doesn't mean it was worth £5bn to a buyer.  The deal involved a significant premium on the share price, so from that perspective you might say Nationwide paid over the odds.

Nationwide paid a premium over the undisturbed share price, but they still paid substantially less than the value of Virgin’s net assets.  

Hence on closing they paid approx £2.8bn and booked an immediate gain of £2.3bn.  The booking of this gain implies that Nationwide agreed the value of the net assets acquired, otherwise they would have written them down in line with their accounting policies. 

I don't think anyone is questioning the valuation of the assets, but £5bn in assets does not mean your business is worth £5bn. VM were struggling to deliver growth, particularly in mortgages, and were suffering from a funding disadvantage versus larger banks, which meant they had thinner margins.

They were historically off target on below-the-line costs, and in the year prior had  announced a plan to invest a further £130m in cybersecurity, which had not been expected by the market and so was not in forecasts. Consequently, the profits they generated were well below where they needed to be.

A business is only worth what someone is willing to pay for it...

Total assets of VM were much higher than £5bn (e.g all of the mortgage lending would have been classed as assets on their balance sheet).  The £5bn was net assets and as part of the acquisition Nationwide would have assessed the value of these assets (likely ranging from cash to intangible assets) to them and adjust the value if necessary. 

This article gives a good background.

https://www.theguardian.com/business/2024/nov/27/nationwide-gain-virgin-money-takeover

To be able to report a £2.3bn gain on acquisition using their own accounting methodologies shows anything but overpaying.

That's all true, but it still doesn't mean that VM was worth £5bn on the open market.

This article is a bit old, but the fundamentals still apply and it's a  really good insight into why banks often trade at a discount to asset value:

https://lightbulbmoment776997292.wordpress.com/2021/01/04/why-are-banks-trading-at-a-discount-to-its-net-asset-value/

Clearly not £5bn on the open market as otherwise the shares would not have been at a discount.  

Nationwide as a mutual is not subject to the same market scrutiny (and arguably short-termism) as listed rivals so they’re arguably in a better position to book the day 1 gain and then invest in quietly transforming the business.  On the flip side, I do feel there is a democratic deficit at Nationwide - theoretically the board are accountable to members but practically there is no substantive way to challenge the decisions of the board.

It would be interesting to have a crystal ball and see where an independent VM would be trading now.  For years BARC was trading well below TNAV but it’s had quite the run over the last couple of years and must be pretty much trading at book now.  

Yeah, Barclays has done well and now looks to be at just under, if not equal to, book value. I think the VM leadership were a big part of the problem, but if they'd been changed who knows what would have happened.

gt94sss2

EllieDog said:

I am interested in Forum members views in the aspect of Virgin Money making a payment to its account holders following its sale to Nationwide. This is due to be formally completed in April.

Nationwide purchased Virgin Money in October 2024 and have owned it since then

This April is just a tidying up of Nationwide's corporate structure and will result in most Virgin Money customers eventually becoming members of Nationwide.

EllieDog

Thanks to everyone who has posted a comment on this. I have learnt a few things from your posts. I am already considering switching banks to First Direct because the benefits offered best reflect my circumstances. I do not intend to wait and see when the terms and conditions on my Virgin Money account might change. Thankyou again for your information and advice. 

friolento

If you choose FD, you can currently get an extra £50, on top of the FD switch bonus

 https://www.topcashback.co.uk

TheBanker

EllieDog said:

Thanks to everyone who has posted a comment on this. I have learnt a few things from your posts. I am already considering switching banks to First Direct because the benefits offered best reflect my circumstances. I do not intend to wait and see when the terms and conditions on my Virgin Money account might change. Thankyou again for your information and advice. 

But do remember First Direct could change their T&Cs at any time, subject to giving notice to customers - so you may find yourself needing to switch again in future. Fortunatly, the CASS system makes it relatively easy to move your account when you find your current bank no longer meets your needs, or someone else is offering a better deal. And you aren't limited to one account - quite a few people have a second account from someone like Chase, thay they just use for overseas spending.