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The chatter has come to a fever pitch as it appears that Sir Richard Branson will be taking Virgin Money public on the London Stock Exchange in the very near future. An official announcement is expected this week.
Don’t expect this IPO to be as anywhere near the size of the recent Alibaba (NYSE:BABA) offering. On the other hand, it will be an interesting proposition to watch what happens, not only the the IPO, but to other banking stocks as well.
What I like about the portent of a Virgin Money IPO is that the company, actually is, as Madonna would say, Like a Virgin, compared to the institutions of ill-repute that have defiled the industry and defrauded consumers. “We are not burdened by the historical conduct and legacy challenges that face many incumbent banks. We remain confident that we can continue to make real progress on our quest to make banking better and can continue to grow our business strongly, profitably and responsibly.” So says Virgin Money CEO Jayne-Anne Gadhia.
Virgin Money delivered £210 million in revenues and generated £59.7 million in pre-tax profits during the first half of 2014 on its business model “launched to give customers a better deal.” Compare those numbers to £163.7 million in revenue and £13.1 million in pre-tax profits for 2013. In the company’s half-year report, delivered on 12 September, Ms. Gadhia commented that, “Despite the investment in building our capabilities and associated infrastructure, our cost income ratio has continued to decrease. Similarly, the growth in our mortgage and credit card businesses has not been at the expense of asset quality, as we maintain our rigorous approach to underwriting and risk management.”
She went on to note that, “We have a powerful brand, a strong balance sheet, a strong core business franchise and, through our ambition to make ‘everyone better off,’ a clear set of values that live throughout our business.”
One industry observer pointed out that, “The UK economy is picking up. Rates are going up. Overall, it is not a bad environment to be selling bank shares.”
£50 million of monies gained in a Virgin IPO will go directly the the Treasury to fulfill conditions of it’s acquisition of the “good bank” portion of defunct Northern Rock in 2011.
