Nationwide Building Society said it could realise as much as a £1.5 billion gain on its acquisition of rival Virgin Money, announced earlier this year and expected to close in the fourth quarter.
The gain reflects the gap between Virgin Money's tangible net asset value of £4.4 billion and the acquisition price of £2.9 billion, Nationwide said, noting that the final figures on completion could vary.
The deal showed Nationwide's strong financial position as a member-owned society with a cheaper cost of capital than many rivals, chief executive Debbie Crosbie told Reuters.
"Strategically as a mutual that puts us in quite a different place to not only make the acquisition, but deliver value and benefit back to our members," she said, adding that Virgin Money customers should benefit in the long run as well.
Nationwide also reported that its annual profit fell to £1.8 billion, from £2.2 billion a year earlier as competition in the mortgage market squeezed margins.
Although profit fell, Nationwide said it rewarded customers with a record £2.2 billion in value, including a £344m cash payout and better than market rate pricing on products.
Nationwide extended its promise not to close more of its 605 branches until 2028, at a time when Britain's high street lenders are slashing their outlets across the country as customers increasingly bank online.
Credit impairment charges reduced to £112m from £126m the previous year, and Nationwide said mortgage arrears remained low although they have started to increase as higher interest rates push up monthly payments for homeowners.
