Virgin determined to break stranglehold big five banks have on current accounts

Virgin boss Sir Richard Branson

Virgin boss Sir Richard Branson

First published in Business News
Last updated
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VIRGIN Money is determined to break the big five banks' stranglehold on current accounts, but its chief executive warned against political intervention in the banking sector.

Jayne-Anne Gadhia's assertion that market forces rather politicians should dictate the size of banks will come as a blow to Ed Milliband who last week pledged to break up the high street banks if he wins the next general election.

The Labour leader argued that forcing HSBC, Barclays, RBS, Santander and Lloyds Banking Group to sell-off branches would pave the way for the likes of Virgin Money to boost High Street competition.

Mrs Gadhia doubted the plan would work in practice, citing the troubled
branch sell-offs at Lloyds and RBS as examples, and said she was wary about Westminster taking a hands-on role in the industry. 

"I'd prefer market forces, not politicians to decide the size of banks," said the Virgin Money chief, who confirmed that staff at the lender were being given five per cent bonuses after it reported a first profit since the takeover of Northern Rock in 2011.  

The bank, which bought the former failed lender from the government for an initial £820m, made an underlying profit of £53.4m, against losses of £2.5m a year earlier thanks to market-beating growth in mortgages and savings.

The business acquired a network of 75 branches, a £14bn mortgage book and retail deposits worth £16bn when it bought Northern Rock in late 2011.

But the Rock's multi-billion pound book of toxic loans was left in state hands to be wound down.

Virgin Money employs more than 2,500 staff, with 1,700 people based in  Newcastle.

It recruited 250 new staff last year, 180 at its Gosforth offices, and those numbers are expected to increase further, revealed Mrs Gadhia. 

"We can only see growth and our Newcastle site is fundamental to that," she added.

The lender, owned by Sir Richard Bransons Virgin Group, Wall Street billionaire Wilbur Ross and an Abu Dhabi investment fund, said retail savings balances were up 17 per cent to 21.1bn - in excess of market growth of 5 per cent - while mortgage balances rose 17 per cent to £19.6bn, compared with market growth of 1 per cent.

This summer it will enter the current account market with between 50,000 to 100,000 customers expected to sign up for the no-frills deal, which Mrs Gadhia hoped would help it challenge the "oligoploy" of the big five banks. 

"I wouldnt advocate breaking them up, but we are keen to see an end to their stranglehold on current accounts," said Mrs Gadhia, who urged for greater transparency in the way banks use current accounts to fund other activity.  

The Virgin Money boss received a pay package worth £1.2m last year, and according to the companys annual report, her base salary will rise from £550,000 to £637,000 this year, but the maximum bonus will be cut to 200 per cent of salary - from 300 per cent previously - in line with new European rules. The overall maximum figure available is unchanged at £2.3m.

Virgin Money is the only UK bank to resolve 100 per cent of its complaints within eight weeks, and Mrs Gadhia said the bonus being handed to all staff below executive level was a reward for "working their socks off" to take the bank into profit and give good customer service.


 

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