Virgin Money (VM.) drops 5.1% to 401.1p after one of its largest backers is reported to be looking at reducing his stake in the challenger bank.

Billionaire investor Wilbur Ross, who owns 33.5% of the business, is looking to sell 60 million shares in a joint deal with Abu Dhabi-based fund Stanhope Investments, which holds 4.4% of the stock.

The price is believed to be around 400p a share. The size of the deal was increased from the 45 million shares originally offered for sale, according to reports.

It’s a good time to take some cash off the table. The stock has advanced 41% since it floated in November, despite a weak core business and grew on the back of demand for a high profile name.

Web - Virgin Money - 15 April 2015

Net interest margin – the difference between the interest it charges to depositors and receives from those it lends to – was a disappointing 1.5% in 2014. Rival challenger bank Shawbrook’s (SHAW) net interest margin stands at 6.1%.

Another issue for Virgin is costs. Spending 68.7p of every 100p it earns is too high, despite it falling from 77.2p in 2013. On the plus side, its balance sheet houses huge reserves, boasting a 19% common equity tier 1 ratio, which should provide adequate protection against a downward economic trend.

Issue Date: 15 Apr 2015