US-based banking giant Citibank has unveiled a 10-year deal with Sir Richard Branson’s Virgin Money offshoot that will see the two companies launch a new range of credit cards, retail deposit accounts and mortgages.
A Citibank spokesperson confirmed the deal was signed last week. It appears to be typical of Branson’s joint ventures – he provides the brand strength and marketing know-how, while Citibank will provide the funding and banking infrastructure.
The Virgin Money brand has all but fallen off the radar in the recent year since Virgin Money’s previous credit card deal with Westpac came to an end in 2008. The 750,000 Virgin customers were moved to Westpac after the bank paid Virgin Money a $39 million fee.
Virgin Money exited the mortgage sector in 2008 as a result of the global financial crisis, although the company still retains a small superannuation and insurance business.
As under the previous Virgin Money/Westpac deal, the new Virgin Money products will only be available over the internet or through Citibank’s call centres.
The first credit card is expected to appear in July next year.
Matt Baxby, managing director of Virgin Money Australia, said in a statement: “This agreement, with its comprehensive range of banking product, is a first for the market. The partnership with global banking leader Citibank represents a new focus and direction for the Virgin Money brand in Australia, and will provide Australian consumers with increased choice.”
Richard Branson is known to be very bullish about the opportunity to push into the global banking sector, given the fact that confidence in banking institutions around the world is low following the global financial crisis.
In May, Branson wrote in a British newspaper that the country’s banks should be broken up to ensure the financial crisis was not repeated.
“The Government has the ability to exert considerable influence over the sector, given its big shareholdings in many banks. The sale of these stakes must promote competition and Government should look to break up the larger groups as soon as is possible.”
“We must ensure that we prevent such a crisis again – but we must also bring back competition if we want the consumer and small businesses to be protected.”
Branson’s opinion piece coincided with news that Virgin Money’s British operation would expand into the retail banking sector, either with the establishment of an online bank or a partnership with an existing bank with a established brand network.
The latest reports out of Britain indicate Virgin Money is still some months away from moving on its plans.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
