Richard BransonÔÇÖs Virgin Money has approached the US private equity firm Blackstone to seek backing for its bid for the UK government-owned bank Northern Rock.
According to the Daily Telegraph, Virgin has held talks with Blackstone and other parties ahead of its proposed move into the UK financial services market.
Northern Rock, which was the first UK bank to succumb to the global banking crisis, is thought to be worth up to £2 billion. Virgin made a failed £1.5 billion bid for the bank in 2007.
Last week, Virgin Money, which already offers online savings, credit cards and insurance policies, bought a small provincial bankÔÇöChurch House Trust BankÔÇöfor ┬ú12.3 million, which gave it the license required to sell savings and home loan products in the UK. Yeovil-based Church House has only 3,000 customers and no branches, and made profits of just ┬ú450,000 in 2008.
Virgin Money will now rebrand the bank and plans to invest £37.3 million into its future development.
Branson said of the deal: ÔÇ£The Church House Trust business offers us a strong platform for growth. Virgin Money aims to bring simplicity to the UK banking market which has traditionally been a complex sector.ÔÇØ
Branson has long been keen to move into the UK mortgages and savings market. A partnership with Blackstone could mark the first private equity-backed bank in the UK.
Jayne Anne Gadhia, CEO of Virgin Money, said: ÔÇ£The financial crisis has tarnished the reputation of many UK banks. Virgin Money will provide a better, different form of banking to its customers, increasing competition in the sector.
ÔÇ£Our aim is to make ÔÇÿeveryone better offÔÇÖ in the way we do business by offering good value to customers, treating employees well, making a positive contribution to society and delivering a growing profit to shareholders. Our approach to banking is founded on developing a sustainable, savings-based business.ÔÇØ
The UKÔÇÖs government is keen to increase competition in the banking sector and new entrants are expected to feature heavily this year. Existing players are also expected to try and boost their presence.
Northern Rock was formally split last week into Northern Rock and Northern Rock Asset Management (NRAM). NRAM contains toxic assets as well as the group's £350 million pension scheme.
Northern Rock has £19 billion of savings, £10 billion of quality mortgages and 76 branches. NRAM has £50 billion of mortgages and £4.5 billion of unsecured loans.
Other potential bidders for Northern Rock include National Australia Bank, which owns the UKÔÇÖs Yorkshire and Clydesdale banks, as well as Spain's Santander.
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