Richard Branson's Virgin Money starts to benefit from Northern Rock takeover

Bank edges towards full-year profit and plans to launch current accounts after buying 'good' part of stricken lender in 2012
A Virgin Money branch
A branch of Sir Richard Branson’s Virgin Money, one of 75 rebranded when the bank bought Northern Rock in 2012. Photograph: Rui Vieira/PA

Sir Richard Branson's Virgin Money has started to reap the rewards of last year's £750m takeover of Northern Rock by edging close to a full-year profit and preparing to launch current accounts by the end of the year.

Virgin took control of the "good" part of Northern Rock in January 2012 and says it is now the UK's third largest mortgage lender, after drawing £710m from the government's funding for lending scheme.

Jayne-Anne Gadhia, the boss of Virgin Money, who was paid £800,000 in cash last year and also received undisclosed deferred bonuses, said the bank would be able to offer current accounts by the end of the year.

The bank, which has rebranded all 75 Northern Rock branches, made an operating loss of £8m compared with £59m a year earlier. On a statutory basis, Virgin Money reported £150m of profits, up from £23m, bolstered by £139m of negative goodwill incurred when it paid less for the nationalised lender than the value of its assets.

Virgin is required to hand £80m to the taxpayer if it floats its bank or sell it off before 2016 and Gadhia said that while the group was working on a possible flotation it was "not top of my priority list".

Meanwhile, Branson's Virgin Rail venture posted lower profits last year but still recorded a healthy return for a franchise that it nearly lost in 2012. Virgin Rail delivered a pre-tax profit of £25m in the year to 30 April 2013, down from £43m in the previous 12 months.

Branson co-owns the business with Stagecoach, the public transport group, and won back the London-to-Glasgow franchise in dramatic fashion last year after the government had awarded it to FirstGroup. Ministers were forced to rescind the decision and hand an extension to Virgin after discovering flaws in the contract bidding process.

Virgin Rail has reaped a cash windfall from government contracts to operate the west coast line since 1997. Between 2002 and 2012, for instance, Virgin Group and Stagecoach shared dividends of £381.7m from Virgin Rail.