Virgin Money Backs Doubling Of Bank Bonuses
Sir Richard Branson’s banking arm will this week become the latest of Britain’s high street lenders to say that it is supporting the payment of higher bonuses under new European rules.
Sky News has learnt that Virgin Money is to reveal alongside its full-year results that its shareholders have approved a request from its board to award up to 200% of the salaries of top executives as bonuses.
The disclosure, which goes beyond that required of the privately-owned Virgin Money, will come as the company says on Tuesday that it returned to profit for the first time since acquiring Northern Rock from the Government in 2011.
The bonuses decision, which reflects a 100% bonus-to-pay ratio cap without shareholder approval, was more of a formality for Virgin Money than listed rivals, which must put the move to their annual meetings this year.
People close to Virgin Money said that its results statement would provide detailed data akin to that of one of the major high street banks, each of which has announced its 2013 results during the last month.
Virgin Money’s board has decided to do so in order to furnish potential investors with more information about the business as it prepares for an initial public offering on the London Stock Exchange in the medium term, one said.
A flotation is unlikely before next year at the earliest, they added.
The bank’s results will show a strong performance in 2013 following the integration of Northern Rock, whose collapse in 2007 sparked Britain’s financial crisis.
Jayne-Anne Gadhia, Virgin Money’s chief executive, is expected to say that its savings book saw strong growth, reflecting its policy of offering customers the same rate across all channels and shunning teaser rates.
Last week, Royal Bank of Scotland said it was following suit in an attempt to win back the trust of consumers.
Mrs Gadhia’s total pay package of about £950,000 in 2012 is understood to have risen to roughly £1.1m last year, an insider said.
Her base salary of £550,000 is likely to rise modestly in 2014, reflecting the Virgin Money board’s keenness to retain her as Virgin Money prepares for an assault on the UK current account market.
Its plans are being drawn up against a backdrop of growing political hostility to the dominance of the country’s five major high street lenders.
Ed Miliband, the Labour leader, will ask competition regulators to recommend a legal market share cap for banks if he wins the next general election, which he argues would pave the way for the likes of Virgin Money to mount a more effective challenge.
Virgin Money recently began trialling a current account among the bank’s staff, with early indications understood to have been positive.
The planned public launch of the product later this year could mark a potentially-significant phase in efforts to bolster competition in the market.
More than 80% of accounts are supplied by the five biggest lenders: the state-backed Lloyds Banking Group, owner of HBOS, and RBS, which owns NatWest; Barclays, HSBC and Santander UK.
Once the staff trial has been completed, Virgin Money will target consumers who are underserved by the major lenders, offering a basic account with no fees or charges and free access to the UK ATM network of cash machines.
It is also likely to say this week that it expects to be aided by the new seven-day switching system for current account providers which came into effect last autumn.
Virgin Money, which sponsors the London Marathon, now has more than 4m customers, having established a significant market share in loans, insurance and savings.