The UK's Nationwide Building Society said it would realise a bigger-than-forecast gain of £2.3 billion from its acquisition of rival Virgin Money, as it also reported a sharp drop in profits for the first half of the year.
Statutory profit before tax fell 43% to £568m in the six months to September 30, down from £989m the same time the year before, as falling interest rates ate into margins while it sustained payouts to its members.
Nationwide said the £2.3 billion gain from the Virgin deal was more than the £1.5 billion it had previously forecast earlier this year.
The gain reflects the gap between Virgin Money's value and the acquisition price of £2.9 billion it paid, Nationwide said.
The deal saw cash-rich Nationwide snap up a smaller rival, bolstering its future ability to earn from business banking and credit cards as Virgin struggled to compete with bigger incumbents such as Lloyds and NatWest.
The acquisition has made the customer-owned builing society Britain's second-largest provider of mortgages and retail deposits, with total assets of more than £370 billion, it said.
Nationwide says it will take 18 months to study Virgin Money's business and books, operating it as a wholly-owned subsidiary before it completes a full integration and in doing so likely cutting overlapping jobs and business functions.
The lender, unlike the big shareholder-owned banks it competes with, does not prioritise profit but instead measures how much it pays out to its members in favourable savings rates and other methods.
This measure, known as member benefits, hit £950m, thanks to pricing and incentives that were better than average market prices.
