The parent of Yorkshire Bank and Clydesdale Bank has agreed to buy Virgin Money for £1.7bn.
The businesses say the deal will create the UK’s first “true national banking competitor to the status quo”.
The new group will serve around six million customers.
A notice to investors from CYBG says: “The combined group will have the capabilities, scale and national presence required to lead the way in the future of UK banking, with a full-service product offering across retail and SME, established and innovative technology and the iconic Virgin Money national brand that is underpinned by a strong customer service culture.”
The new combined company will keep the Virgin Money brand.
Virgin Money chief executive Jayne-Anne Gadhia will stay on at the company as an adviser to CYBG chief executive David Duffy, who will keep his position in the new group.
CYBG chair Jim Pettigrew and chief financial officer Ian Smith will also keep their jobs in the new company.
Gadhia says: Our intention has always been to make everyone better off. The offer reflects confidence in our strategy, our track record of delivery and the complementary strengths of the two businesses.”
She says: “The combination of Virgin Money with CYBG will have greater scale to challenge the big banks. It will also accelerate the delivery of our strategic objectives, particularly the expansion of the products we offer to customers.”