Interview: Jayne-Anne Gadhia, Virgin Money

Jayne-Anne Gadhia, chief executive of Virgin Money. Picture: Neil Hanna

Jayne-Anne Gadhia, the chief executive of Virgin Money, believes the sincerity of bigger rivals when they say they want, like the challenger banks, to focus more on solid, dependable retail banking franchises.

But she says they labour under disadvantages that should give her company and its peers a competitive edge in gaining consumer trust for some time yet.

Gadhia reels off those hurdles for Britain’s big four banks as their continuing “legacy issues” involving a string of misconduct scandals, the diversion of their investment banking operations, the fact that they are too big to manage “and complicated IT systems that are tangled and old”.

The IT criticism is topical – made as we speak on the day last week that Royal Bank of Scotland was hit by another software public relations fiasco. Hundreds of thousands of its customers were worried when transactions had not been processed, following heavy regulatory fines for RBS last year for a computer breakdown in 2012.

Gadhia says: “A brilliant thing for us is we don’t have to look backwards. It must be a nightmare to have to look backwards at problems when you are trying to do the best for the customer. Virgin Money is delightfully free of the drag of legacy. Long may it continue.”

Her concern for positioning Virgin Money in business’s “ethical” camp is typified by the bank’s support of the Scottish Business in the Community annual awards tomorrow at Prestonfield House in Edinburgh.

Gadhia will be on the top table at the event, which aims to celebrate the best of Scotland’s corporate social responsibility, including tackling poverty, working with children, young people and the disadvantaged to help them gain skills, and harnessing Scotland’s workforce through employer supported volunteering.

As background to that event, she says Virgin Money “wants to help the community wherever we can”, and Scottish Business in the Community is a tangible example.

In a similar vein, she has before now let charities use Virgin Money’s new stand-alone “lounges”, of which there are five, including one in Edinburgh and one in Glasgow. These facilities have also proved popular with its customers who value a haven to have a coffee, use the internet or relax with a magazine – with no staff trying to sell them products.

Gadhia plans to open another two lounges each year, the hope being to foster a feel-good factor that helps drive longer-term sustainable business relationships and revenue growth. In fact, she is keener on adding more lounges than adding to the group’s 75-strong branch network.

Things certainly look quite healthy for the bank, backed by Sir Richard Branson and with a solid 2.8 million customer base. Following a successful stock market flotation last year, Virgin Money recently announced a more than doubling of underlying annual profits to £121 million.

A pivotal moment came with the bank’s £747m acquisition of the “good” part of taxpayer-owned Northern Rock in 2012. The joint mortgage book then was £14 billion, and that has now soared to £23bn. “That’s good for us and society,” Gadhia says, as we speak in the group’s London office off Piccadilly.

At the time of the Northern Rock deal, Virgin Money did not have a credit card. Now it has £1bn of credit card balances, with three quarters of a million customers (not to mention its newly launched card featuring the artwork of punk band the Sex Pistols). There is a new partnership with Friends Life in life assurance, and the group is making headway in home and car insurance.

Virgin Money also launched a current account 12 months ago. With balances of more than £200m, it is still tiny compared to the major banks. But Gadhia says the nationwide rollout has been successful and she has high hopes for it if the current Competition & Markets Authority (CMA) probe into high street banking leads to current account number portability.

It is an issue she is passionate about, citing how the mobile phone industry flowered with innovation after people were allowed to transfer their phone numbers with them when they changed devices.

She says something similar could be done in banking if the regulators have a mind. Gadhia even suggests a halfway house at this stage to address objections from what she brands the “vested interest” of the big four which dominate the current account market that such an exercise would be too costly.

Initially, a new industry current account databank could be restricted to new banking customers, she says, and it would help the challenger banks grow.

Gadhia is less optimistic that the CMA, which is expected to report early in 2016, will recommend an end to free-if-in-credit banking.

She has been banging the drum for such a move in recent years, claiming there is no such thing as free banking as it is subsidised by punitive charges on products when customers go into the red elsewhere in a bank. “Payment protection insurance mis-selling is an example. The banks could not make a profit on the loan, so they had to sell insurance as well,” she says.

But Gadhia adds that she is a realist and “it would be a brave politician or regulator who would take that [free-if-in-credit banking] away from the market”.

It is her second stint with Branson. In the mid-1990s she launched the Virgin One account, which offered flexible mortgages.

RBS bought out Virgin’s stake in the venture in 2001, with Gadhia joining as part of the package and then running the Scottish bank’s £65bn mortgage business for five years. On rejoining Branson with perfect timing a little before the financial crisis, the bearded one reportedly said simply “welcome home”.

While running Virgin Money, Gadhia has grown more accustomed to being in the spotlight, partly from the parent group’s peerless marketing, and perhaps people wondering whether she will dish any dirt on RBS under Fred Goodwin’s at first successful, but ultimately ill-fated, leadership.

On the ex-RBS boss, she is gracious and measured in her judgement. “Fred could be thoughtful, charming and charismatic. The ‘Fred the Shred’ thing he could do as well. But I think there is an imbalanced picture, he wasn’t like that most of the time. He just wanted to run a good bank.”

However, Gadhia doesn’t pull any punches – most recently on the BBC Radio Four Today programme – of the “alpha male” RBS culture in those days.

“There was definitely a celebration of scale. We want to be the biggest, there was always talk about new acquisitions,” she says.

The Virgin Money boss lives in Edinburgh with her husband, Ashok, and daughter Amy, where the bank has a sizeable office, but also divides her time between Virgin Money’s offices in London and Newcastle.

She insists the lender has “barely scratched the surface” of what is achievable. Plans to expand its successful “digital banking” operation are also a priority, she says, adding: “The stock market flotation has gone well, and we are pleased, but our main focus remains on taking care of customers.”

30 SECOND CV

Born: Stourbridge, West Midlands in 1961

Educated: Culford School, Bury St Edmunds and London University

Car: BMW

Favourite holiday destination: Paris

Favourite musician: Paul McCartney (but Donny Osmond as a teenager!)

Book or Kindle? Book

What could you not live without? Friends, family, iPad and hairdryer

What makes you angry? When people don’t live up to their responsibilities

What is the best thing about your job? The fabulous range of people I meet