Nationwide has struck a preliminary deal to buy Virgin Money for approximately £2.9 billion.

If the acquisition goes through, the merged companies would create a group with total assets worth £366 billion, which they say would make it the second largest provider of mortgages and savings in the UK.

Nationwide said that the move would allow it to deepen its products and services “faster than could be achieved organically”, boost returns to support its financial position, and increase its scale across core lending and deposit markets.

"A combination with Virgin Money would accelerate Nationwide's strategy and create a stronger, and more diverse, modern mutual," said chairman of Nationwide Building Society, Kevin Parry. "The combination would increase Nationwide's scale and financial strength, put us in a stronger position to continue to provide Fairer Share Payments to eligible Nationwide members, and offer rates for mortgages and savings that are, on average, better than the market average."

Virgin Money first changed hands six years ago when it was bought by CYBG – the owner of Clydesdale Bank and Yorkshire Bank – for around £1.7 billion.

The company is currently the UK’s six largest retail bank by total assets, with a customer base of 6.6 million.

"This potential transaction with Nationwide represents an exciting opportunity to build on the significant progress we have made in becoming the only new Tier 1 bank in recent history," said David Duffy, chief executive, Virgin Money. "The combined scale and strength would expand our customer offering and complete our journey in the banking sector as a national competitor."

Nationwide said it is not planning on making any cuts to the 7,300 full time staff at Virgin Money in the "near term".

The bank's chief executive Debbie Crosbie said that the organisation would "remain a building society", adding that a combined group would help in its aim to retain existing branches.

Last year Virgin Money announced it would close around 30 per cent of its branch network to address customers shifting to its digital services.

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