The UK’s competition authority, the Competition and Markets Authority (CMA), has launched an investigation into a proposed £2.9 billion deal by Nationwide Building Society to acquire Virgin Money UK. The acquisition, spearheaded by former AIB Chief Executive David Duffy, was announced in March and is likely to be concluded by the fourth quarter. If successful, it would position Nationwide as the UK’s second-largest provider of savings and mortgages, following Lloyds Banking Group and its subsidiary, Halifax.
With Nationwide being the nation’s third-largest mortgage provider, possessing one-tenth of all UK savings and current accounts, and Virgin Money being the sixth-largest retail bank, the CMA is assessing the possible ramifications on competition. The regulator has forty days to make its primary determination and has called for input from any party with an interest in the matter by 14th June.
Industry experts, responding to the announcement in March, indicated that the acquisition could potentially intensify competition in the UK mortgage and savings sectors, prompting a resurgence in some banking shares that have been affected by global political dynamics and stagnant economic growth.
The Nationwide and Virgin Money merger forms part of a recent wave of Mergers and Acquisitions activity among UK lenders, as they seek to strengthen their economic position against potential increases in poor loans amidst rising costs of living. This follows Barclays’ purchase of Tesco’s banking operations for around £600 million in February.
Nationwide indicated last week that the Virgin Money purchase could lead to a net gain of approximately £1.5 billion, indicating the tangible net asset value of Virgin Money (£4.4 billion) compared to the takeover cost of £2.9 billion.