You have to hand it to the nation’s favourite tax exile Sir Richard Branson. When he founded Virgin Direct in 1995 he aimed to shake up the fuddy-duddy world of finance by bringing branding and customer focus to banking. Suddenly, retail credentials became the fashion in banking.
HBOS recruited Andy Hornby from Asda who promptly led the bank to the precipice. Abbey National (saved by Santander) also went retail, bringing in Jonathan Hart from Woolworths among others.
Remarkably, amid all the marketing hype, only Virgin Money managed to ride out the financial crisis, eventually snapping up the entrails of Northern Rock, becoming the North-East flagship bank based in Gosforth in Newcastle.
Alex Burmmer says when Sir Richard Branson founded Virgin Direct in 1995 he aimed to shake up the fuddy-duddy world of finance
Technically Virgin Money is being bought by CYBG, the sexy combination of Clydesdale and Yorkshire banks, for £1.7billion, a premium of around 40per cent.
As well as making departing Virgin chief executive Jayne-Anne Gadhia nicely rich (with an advisory sinecure still to come) it once again shows the brilliance of Branson in extracting repeated fortunes from his branding stretching from Virgin Music through to Virgin Atlantic, Virgin Mobile and Virgin America.
And as with previous deals he has organised an annuity in the shape of a £15million licence for renaming CYBG outlets Virgin Money. The new bank is billing itself as the sixth largest in Britain and will largely combine the small-business lending focus of Clydesdale and Yorkshire with the marketing bent of Virgin Money.
Regulators will doubtless be keeping a close eye on Virgin Money’s dubious sales of credit cards using zero interest rate come-ons to boost revenue.
Alex says former members of the Bank of England’s interest rate setting Monetary Policy Committee should follow Lord King and keep quiet
Another obvious danger is the rush to find £120million of savings by 2021. That means some trimming of the branch network and bringing IT systems closer together. Boss David Duffy is confident it can be done but he ought to remember TSB and Paul Pester before boasting too extravagantly.
Immediate winners are Gadhia and Branson although not all shareholders will be looked after so generously. The most important outcome is the Virgin Money identity as a champion with a focus on the North.
Former members of the Bank of England’s interest rate setting Monetary Policy Committee should follow Lord King and keep quiet.
Andrew Sentance is forever advising his successors to raise rates. Arch dove Danny Blanchflower takes the opposite view.
The Bank of England is sitting on its hands in contrast to the US Federal Reserve, which is robust about normalising interest rates and last week raised official rates to 1.75per cent to 2per cent.
The Bank pulled back from an increase in May after a soft first quarter of the year and may also be fearful of removing monetary stimulus while Brexit is still in the balance.
Sentance blames Canadian governor Mark Carney for the UK’s failure to follow the Fed and lift rates. He thinks what the UK needs is a governor who better understands the UK’s economic record, including the propensity to live on the never-never.
He has a point about credit and that the failure to hike rates has undermined the pound which in turn keeps inflation high. But while Sentance may have a point on rates, his idea that only a British governor can deliver is poppycock.
The successor to Mark Carney needs to be the best person for the job. If it turns out to be the Indian economist and former central banker Raghuram Rajan there is no reason to think he will be any less intellectually rigorous than a British counterpart.
Fat-cat pay: Nationwide chief executive Joe Garner
What is necessary is a candidate with intellectual recognition who can stand up for the UK globally.
There are obvious UK candidates who could do this but nationality is no more a qualification for taking charge of the Bank of England than it is for Barclays, Lloyds or RBS. All are run by capable overseas leaders.
Nationwide constantly reminds us of the wonderful benefits of mutual ownership.
Members deserve to know much more about the £620,000 of benefits spread among four top executives.
Chief executive Joe Garner received £217,000 of these payments as part of his fat-cat package of £2.3million.
The report and accounts inform members that the benefits included medical cover, car allowance and use of a company vehicle and driver. Must be some health plan, a super-car and the finest chauffeur in the world.