LONDON – Businessman Richard Branson said Monday he will shake up Britain’s retail banking system as his Virgin Money group takes control of the nationalized lender Northern Rock.
Branson paid the British government 747 million pounds ($1.1 billion) for the troubled lender last year and said it will keep its 75 branches open for at least three years.
He said the bank would offer easy-to-understand financial products.
Branson’s Virgin Group has tended to buy large, clunky companies, rebrand them as modern, user friendly companies with updated logos and clever marketing and sell them on to other shareholders. He has taken a similar approach to cable provider Virgin Media and train operator Virgin Trains.
He also founded Virgin Atlantic Airways with the same idea – to offer customers a youthful rival to the more staid British Airways.
Branson visited the first branch to be rebranded as Virgin Money in Newcastle, northern England Monday.
“The Virgin Group has always gone into markets where there’s been an opportunity to make things better for customers,” he said.
Northern Rock’s funding crisis in late 2007 gave Britain shocking images of desperate depositors lining up to withdraw their money from the company. The previous government nationalized the bank in February 2008 and guaranteed the security of savings deposits.
Virgin Money was founded in 1995 and has around three million customers. By buying Northern Rock, it takes on another 2,100 staff, 1 million customers, retail deposits of 16 billion pounds and a mortgage book of 14 billion pounds. Before the bank was nationalized, Virgin Money had made an offer in 2008 to take over Northern Rock but it was rejected by the then government as too risky and too expensive.
The government in 2010 split Northern Rock into two businesses: Northern Rock PLC, which Virgin Money is buying, and Northern Rock (Asset Management) PLC which holds a portfolio of the riskiest loans.
The government plans to wind down the asset management unit over time to repay 50 billion pounds advanced by the Treasury.
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