Virgin Money UK PLC (Holding Company) Clydesdale Bank PLC (Lead Bank)

The CreditWatch positive placement reflects that we could upgrade VMUK and Clydesdale Bank by up to two notches on completion of Nationwide's acquisition of VMUK. This reflects our view that our current rating on VMUK may benefit from group support from a higher-rated parent. If the acquisition failed to close, we would reassess VMUK's prospects as a stand-alone group. We expect to resolve the CreditWatch placement upon completion of the acquisition, which is expected by the end of 2024. We use our Banking Industry Country Risk Assessment (BICRA) economic risk and industry risk scores to determine the anchor. The 'bbb+' anchor reflects the geographic mix of VMUK's total credit exposure. Given its concentration to the U.K., this leads to a

...Virgin Money UK's (VMUK's) robust capitalization and resilient asset quality underpin its stand-alone credit profile. Our rating continues to balance VMUK's sound capitalization and asset quality with its concentrated, but solid, business position. In our view, VMUK has made steady progress in delivering its strategy over the past three years, despite weaker than expected results in financial 2023 (ending Sept. 30, 2023). Additionally, it has moderately diversified its loan book by expanding its unsecured and business lending. That said, VMUK has a smaller and less-diverse franchise than its larger U.K. bank peers, with greater reliance on net interest income as a significant source of revenue. Growth in unsecured and business lending will aid diversification and support earnings, although this remains a gradual and challenging process in the U.K.'s current economic environment. Over the medium term, we expect VMUK to maintain its solid business performance and earnings generation, keeping...

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