CYBG, which owns Clydesdale Bank, Yorkshire Bank and digital brand B has secured a deal to buy Virgin Money for £1.7bn.
The move will mean all CYBG’s retail customers and branches will be moved to Virgin Money’s brand over the next three years, creating the UK’s sixth largest bank.
Which? takes a look at what the merger means for products, deposit protection and the branch network of the brands involved.
The deal is due to be completed towards the end of 2018, subject to approval from shareholders as well as regulators the Financial Conduct Authority (FCA) and Competition and Markets Authority (CMA).
CYBG has 2.7 million customers while Virgin Money has 3.3 million, so the move will mean the combined group will have six million customers in total – making it the UK’s sixth largest bank.
The alliance could shake the dominance of the big four banks: Lloyds Banking Group, Barclays, Royal Bank of Scotland and HSBC, which together have a 70% share of the current account market.
Are my savings safe?
The Financial Services Compensation Scheme (FSCS) protects up to £85,000 of the money you deposit per institution.
Currently under the rules up to £85,000 you deposit with Virgin Money and up to £85,000 you deposit with Clydesdale Bank, Yorkshire Bank and its digital bank B is protected.
Given that CYBG plans to rebrand its operation under Virgin Money, it seems likely that just £85,000 deposit protection will apply across the group’s products.
So if you have large amounts of savings or money sat in a current account with both institutions you may need to take action to rearrange your deposits to ensure they qualify for protection under FSCS once the deal is complete, which might worry those with fixed-term bonds that come with a penalty to access early.
However, for now, the message from both CYBG and Virgin Money is customers don’t need to do anything with their deposits as they are still protected and the deal has not yet been finalised.
Neither firm can comment on what will happen before the deal completes but each told Which? customers will be given notice and kept informed if there are any changes that affect their contractual terms and conditions.
- Read more: Who owns who in the savings market?
Will there be more bank branches?
CYBG has 169 branches in the UK while Virgin Money has 74, so customers could benefit from having an enhanced branch network once the deal is finalised – providing no more are closed down.
Which? analysis shows CYBG has shut down 60 Clydesdale Bank and 74 Yorkshire Bank branches over the last three years – totalling 134, or 44% of their network.
We asked CYBG and Virgin Money if they planned to close any branches as part of its plans, and a CBYG spokesperson told us the combined group will maintain a national network of branches, as it forms a key part of their plan to impress customers.
Will banking services improve?
It’s estimated the merger will mean 1,500 jobs will be cut, but bosses say the group will strive to provide ‘the best service in the UK.’
Right now both groups have below average Which? Customer Scores for their current accounts.
Which? Customer Scores are worked out using a combination of overall satisfaction and how likely the respondents are to recommend their bank to a friend.
Virgin Money has a score of 67% when it comes to current accounts compared to 62% on Clydesdale Bank and 65% on Yorkshire Bank deals; below the average of 68% across all providers.
- Find out more: Best and worst banks
How will products be affected?
We asked both groups how existing customers will be impacted by the merger.
CYBG told Which? that products with fixed terms, such as mortgages and savings, would only move to CYBG at the point of renewal, should customers want to remortgage or renew their account. It added that any changes to other product’s terms and conditions would be communicated clearly.
Virgin Money confirmed the proposed phased migration and re-branding approach will be separated into ‘several distinct phases’ aligned with ‘transaction events’ that minimise the complexity to deliver and any impact on customers.
One upshot of the merger of the brands is the potential for more innovative products.
Virgin Money CEO Jayne-Anne Gadhia said: ‘The combination of Virgin Money with CYBG will have greater scale to challenge the big banks. It will also accelerate the delivery of our strategic objectives, particularly the expansion of the products we offer to customers.’
Will the migration cause disruption?
With the botched TSB migration earlier this year, customers might be fearful of how a merger might impact their day-to-day banking.
However, in a statement, both groups confirmed that the IT migration will be phased over 36 months ‘to minimise execution risk with operational integration phased over a similar timeframe’.
CYBG told Which? that it intends to use its own platform and migrate Virgin Money customers over.
There are around 100,000 Virgin Money personal current accounts to move over which CYBG plans to do using the automated Current Account Switch Service (CASS), which it has significant experience of using.
The group also expects to migrate a significant majority of Virgin Money mortgages and savings products on renewal to avoid disruption, while CYBG credit card customers will be brought across to the Virgin Money’s platform, which is a process the Virgin says it has used ‘many times’.
This story has been updated since it was originally published.