Branson ups ante with launch of Virgin Bank
SERIAL entrepreneur Sir?Richard Branson is back with another audacious venture. This time, he is applying to City watchdog the FSA for permission to turn his Virgin Money business into a fully fledged bank – but the move has divided the City.
Virgin has been trying to boost its financial services presence for some time now. Back in?October 2007, Virgin Money made a bid for the stricken Northern Rock, but it was rebuffed by the government, which nationalised the lender instead.
While the Virgin brand is iconic, it has had its fair share of failures:?Virgin Cola was not a runaway success, and Virgin Megastores, which became Zavvi following a management buyout, ended up collapsing.
That said, Branson has managed to succeed where others have failed. His stewardship of the West Coast mainline railway has seen the route perform far better than the East Coast alternative. And Virgin Atlantic is trumping British Airways when it comes to the aviation game. That is why the City is unsure of his chances of success in banking.
“Modern banking obviously needs a degree of sophistication, and we’ll have to see if Virgin can compete,” Barclays Wealth’s Henk Potts said. “To succeed as a bank, it must have international diversification and a focus on emerging markets – or an investment banking arm,” he added.
Branding expert Ian Wood, executive director at Landor Associates, thinks Branson can make a go of the idea. He said: “The public are very forgiving about his brand. I can’t see a Virgin bank failing.”
But Wood warns the group against overstretching itself: “Something technical like investment banking would be a disaster for Virgin.”
Virgin says the application to the FSA is “just an administrative procedure,” and that its desire to set up a bank has been long-held.
Business bodies like the British Banker’s Association welcomed the move because it will lead to more competition. A wave of consolidation, including the tie-up of Lloyds TSB and HBOS, has left consumers with less choice. Perhaps Branson is the man to offer an alternative.