CYBG makes $1.6bn offer for challenger bank Virgin Money

If a deal can be agreed, a combination of CYBG and Virgin Money would create the largest “challenger bank” to the UK’s biggest lenders.

Virgin Money, which is headquartered in Newcastle but has a significant presence in Edinburgh, is currently considering the offer, which would create a brand with six million personal and business customers and a balance sheet of between £60 billion and £70 billion.

Virgin Money spent £38.3 million last year building the technology backbone for a new digital challenger bank, while CYBG launched its own online and mobile-only bank B, back in 2016.

It which was founded in 1995, expanded its business in 2011 when it bought the remnants of Northern Rock for around £747 million and is still one third owned by Virgin tycoon Sir Richard Branson.

Virgin Money’s share price rose by 7.7 per cent to 336.6p while shares in CYBG 1 per cent to 321.4p.

Thomas Moore, investment director for UK equities at Aberdeen Standard Investments, told the BBC’s Today programme that it was possible that the proposed takeover could trigger a wave of deals among other challenger banks.

“What the UK needs is strong competition between strong banks,” he said.”If you have too many small lenders… without the scale economies that the likes of Lloyds and RBS has, then you’ll find that the competitive environment is too tilted in favour of those big mainstream banks.”