Comment: Virgin Money saved CYBG and took a beating for its troubles

Things have come to a pretty pass when a bank loses £200 million, fesses up to £385 million of PPI and its share price rises.

Yep, believe it or not, investors in Virgin Money thought today’s figures would be even worse.

Some doubts linger (as happens when the chairman of your risk and audit committee quits two days before your results). But generally, there’s a sense of relief, particularly on the PPI.

Virgin shareholders fall into two camps; those from the old Clydesdale and Yorkshire bank owner CYBG, and those, including Sir Richard Branson, who were backers of Virgin Money. That’s because last year, CYBG bought Branson’s bank for what was then £1.7 billion-worth of CYBG shares and renamed the company Virgin.

As it turns out, the two groups emerged as the haves and the have-nots.

Virgin, led by founder Jayne-Anne Gadhia, was well capitalised and was proud it never sold PPI. CYBG, on the other hand, flogged tons of it.

With PPI now having eaten up most of the combined group’s capital surplus, the deal has meant Virgin shares’ value has collapsed, while CYBG’s were probably saved from destruction by a rights issue.

If only the Virgin board had heeded warnings of CYBG’s PPI before blithely accepting the bid.

Having said all that, the two banks alone weren’t big enough before. Analysts were saying Virgin was running out of road. The merger has created a business better able to compete against the big boys.

It just leaves a bad taste in the mouth that the spoils of the deal were so one-sided.