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Branson Makes Humble Start In CFhallenge To High Street Banks

Sir Richard Branson has begun his assault on the financial industry with the purchase yesterday of a little-known

private bank as a launchpad for a fully fledged business.

Virgin Money, the personal finance arm of Sir Richard's company, is buying Somerset-based Church House Trust, which has 3,000 customers and no branches, for £12.3m.

The deal is significant because it provides a short cut for Virgin to gain a full banking licence and paves the way for it to offer its own mortgages and current accounts this year.

Virgin Money, expected to rebrand as Virgin Bank when it launches mortgages, already provides credit cards, savings accounts, insurance and investments to 2.5m people. It plans to launch an aggressive bid for retail depositors' money over the next few months to gather funds to lend to homebuyers.

The company is expected to launch higher saving rates once the purchase of CHT has been completed. The higher rates would be aimed initially at existing customers.

It is one of a number of new competitors hoping to shake up a retail banking market dominated by high street names.

David Black, an analyst at Defaqto, said that Virgin Money would have to increase substantially its saving rates, which are as low as 0.1 per cent, if it was to mount a credible challenge to the top providers. The best rates for one-year fixed-rate bonds are about 3.7 per cent.