The Clydesdale and Yorkshire bank brands are set to disappear from high streets after Virgin Money agreed to a £1.7bn takeover by the owner of the two institutions that will lead to the loss of more than 1,500 jobs.
Clydesdale and Yorkshire Bank Group (CYBG) will combine with Virgin Money to create the UK’s sixth-largest bank, with 6 million personal and small business customers, and total lending of £70bn.
While it is CYBG in the driving seat, it is the Virgin Money brand that customers will see in future. The deal signals the end of a high street presence for the Clydesdale Bank brand, which was established in Glasgow in 1838, and its sister brand Yorkshire Bank, which was founded in Halifax in 1859. There are 70 Clydesdale Bank branches and 97 Yorkshire Bank outlets.
The deal also prompted online speculation that because Clydesdale is one of only a small number of banks worldwide that issues its own banknotes, there could soon be Virgin Money notes – perhaps even featuring a portrait of Sir Richard Branson – circulating in Scotland. However, the bank note-issuing licence is in Clydesdale’s name and CYBG has indicated there are no plans to make changes to the notes.
The takeover brings together the UK’s two largest challenger banks, creating what the companies claim will be the first true national competitor to the big five (HSBC, Barclays, Lloyds Banking Group, Royal Bank of Scotland and Santander) – twice as big as the nearest challenger bank, TSB.
Jim Pettigrew, the CYBG chairman, said: “It is clear to us that the combined group can transform the UK banking landscape and offer real benefits to customers and communities throughout the UK.”
CYBG said it was committed to moving all of its retail customer business over to the Virgin Money brand. It is theoretically possible that the Clydesdale and Yorkshire brands could be retained for the group’s small and medium-sized business banking division as the Virgin brand is to be tested out on these customers. The rebranding will cost £60m.
However, there were early indications that the name change will not go down well with some customers in Scotland and Yorkshire. On Twitter, John Lindley said: “Clydesdale and Virgin Money – don’t you dare get rid of the Yorkshire Bank name. We’re more than a brand!” Meanwhile, Charley said: “Not happy about you being rebranded to Virgin Money, been a customer for 40yrs. Clydesdale name iconic.”
Job cuts feature heavily in the £120m in annual savings earmarked under the deal, with a 16% reduction in the combined 9,500-strong workforce. The banks declined to say how many of the combined group’s 250 branches would be closed, although CYGB executives downplayed the prospect of closures because there is little overlap between their branch networks.
The plan is to keep Virgin Money’s head office in Gosforth, Newcastle, for at least three years. Its chief executive, Jayne-Anne Gadhia, who has led the bank for more than 10 years and is one of the most high-profile women in British finance, will become a senior adviser for an undetermined period of time to the CYBG boss, David Duffy, who takes the reins of the combined company.
Virgin Money was founded in 1995 by Branson, who owns a 35% stake, which will fall to 13.1% in the merged company. The sale comes seven years after he led a controversial £747m buyout of Northern Rock after its rescue by the taxpayer.
CYBG has agreed to license the Virgin Money brand for £12m a year initially, going up to £15m in the fourth year, and will also pay additional royalties equivalent to 1% of revenues from the fifth year. The royalties go to Branson.
Gadhia will walk away with a £12.5m paper profit following the all-share deal, which will lead to her exchanging 3.4m shares for CYBG stock. It is unclear when she can sell her shares, with 1.3m unvested and most of them dependent on the firm’s performance.
The Unite union said news of the job losses would come as a shock to staff across the country who had found out through the media and said it was seeking an urgent meeting with Duffy.
Duffy said: “It’s a pretty historic day for CYBG and Virgin Money.” He added that the combined company would offer the full scale of products and services, combining Virgin Money’s strength in mortgages, credit cards and investments with CYBG’s small and mid-sized business banking.
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CYBG is paying 1.2125 new shares in exchange for each Virgin Money share. Based on Friday’s closing price of 306p, this values each Virgin Money share at 371p. CYBG clinched the deal after offering Virgin Money shareholders a larger stake in the combined group, of 38%.
Nick Cooper, the executive director of analytics at Landor branding consultancy, said: “When this deal is complete it will give Virgin Money the scale that it currently lacks and could propel the brand into a position from where it can really challenge the established high street lenders.”
After the recent fiasco at TSB caused by a botched IT migration, CYBG stressed that there would be no “big bang” move of Virgin Money customers to its platform on day one. The transfer will be phased over three years.
