Virgin Money reports strong demand for savings ahead of planned Nationwide deal

Mortgages shrunk by 1.1 per cent which the bank said was partly driven by the impact of more customers paying off their mortgage in full, as people took steps to avoid rolling on to deals with higher interest rates.

It also reflected more “disciplined” lending as the bank tried to protect its finances.

On the other hand, unsecured lending, including credit cards, grew by 1.3 per cent in recent months.

And customer deposits jumped by 2.4 per cent as more people opened ISA accounts at the start of the new tax year, it said.

Meanwhile, Virgin Money said it expects its business costs to be higher than previously expected after putting its restructuring plans on ice ahead of the proposed £2.9bn takeover by Nationwide.

The restructuring formed part of wider cost-saving plans, which included job reductions and scaling back its branches, announced earlier in the year.

But the plans were paused after it reached a deal with Nationwide in March, with the acquisition expected to be completed by the end of the year.

Virgin Money also said it had incurred about £10m worth of costs related to the deal so far, which it anticipates to be “significantly higher” during the rest of the year.

David Duffy, Chief Executive Officer, said: “Our strategy remains on track, with financial performance in line with guidance.

"We delivered continued growth in deposits and unsecured lending in Q3 (the third quarter) and remain focused on developing innovative new products for customers and maintaining good momentum into Q4 (the fourth quarter).

"The acquisition by Nationwide is progressing as anticipated with the recent CMA clearance, and we expect it to complete in the final quarter of the calendar.”

In May, the Competition and Markets Authority (CMA) watchdog launched an initial merger inquiry to consider whether the deal – which is the biggest UK banking merger since the financial crisis – could “result in a substantial lessening of competition” within the UK market.

In July, the CMA said it had cleared the deal following its initial probe.

It said there is no need for further investigations after finding that there is not a “realistic prospect of a substantial lessening of competition” from the takeover.

Speaking in July, Debbie Crosbie, chief executive of Nationwide, said: “This is another important step on the path to completing the acquisition of Virgin Money, with all the benefits for members and customers that this will bring.

“We remain on course to receive all the necessary approvals to complete the deal in the final three months of this year.”

A Virgin Money spokesman said at the time: “We welcome the CMA’s decision to unconditionally clear the proposed acquisition by Nationwide following its Phase 1 investigation.

“The enlarged group will combine two complementary businesses that together can offer more great products and services to a larger customer base.

“We continue to expect that the transaction will complete in the fourth quarter of this year.”