Fledgling bank Virgin Money has reportedly made moves to raise the £2 billion needed to bid for up-for-sale branches of taxpayer-backed banks Lloyds Banking Group and Northern Rock.
Virgin Money, backed by billionaires Sir Richard Branson and Wilbur Ross, has held talks with potential investors about providing the finance for a bid for either of the groups of branches, The Sunday Telegraph said.
Virgin Money is understood to be confident it will have the financing in place to make bids for the branches, although a formal fundraising process has not yet begun with no official letters of commitment signed.
Lloyds Banking Group is selling 600 branches, triggered by a European decision following the Government bailout of the bank, while Northern Rock is selling its 70-branch estate as it looks to return to the private sector.
Virgin Money, run by chief executive Jayne-Anne Gadhia, is understood to be preparing for the bid process for each estate in the summer months, in anticipation of final sales by the end of the year.
The management team is understood to want to ensure it has sufficient tier-one capital in place before making a bid.
American financier Mr Ross has already injected £100 million into Virgin Money and has pledged a further £500 million to be used to help buy a branch estate. In addition, it is estimated Virgin will need to raise a further £1 billion to £1.5 billion to fund its bids.
Other bidders for either or both estates are rumoured to include National Australia Bank, which already owns Clydesdale and Yorkshire banks and private equity firm JC Flowers.
Virgin Money is continuing with its business plans for its own new branches following the announcement it is to open four “lounge-style” branches in London, Edinburgh, Manchester and Norwich.
The bank, which already has three million customers in the UK, is understood to not want to open a branch until its full suite of products is available, including deposits, current accounts and mortgages. Virgin Money was not immediately available for comment.