Virgin Money Halts Plan for Small Business Lending After Brexitby
Former ABN Amro executive hired for push is leaving the bank
CEO says business leaders shouldn’t talk Britain into downturn
Virgin Money Holdings (UK) Plc, the bank backed by billionaire Richard Branson, postponed plans to start lending to small businesses as Britain faces a potential economic slowdown after voting to leave the European Union.
“It’s to do with our view of our economy going forward,” Chief Executive Officer Jayne-Anne Gadhia said in an interview. “Is it the right time for us as a management team, as a business, to get into a new asset class with the economy uncertain? We’d always said, depending on the vote of the referendum, we would make the decision.”
Gadhia said her bank hasn’t seen a slowdown in consumer demand for credit cards or loans after the Brexit vote. The shares jumped as much as 8.2 percent after the Newcastle, England-based lender reported a 53 percent increase in pretax profit before one-time items to 101.8 million pounds ($133.2 million) in the first half from a year earlier.
“There are going to be some strains on the economy as a result of Brexit,” Gadhia said. “But I think it’s beholden on business leaders to manage those strains for a positive outcome for the country.”
Virgin Money’s decision to postpone its start in small-and medium-sized business lending means George Ashworth will leave the bank, Gadhia said. The former Aldermore Group Plc and ABN Amro Bank NV executive was hired in October to lead the bank’s SME plans. “He was offered something different, but he’s decided to move on and continue with his SME life, as it were, elsewhere. He’s fine about that because he thinks it’s the right decision.”
Backed by Branson and U.S. private-equity billionaire Wilbur Ross, Virgin Money is seeking to lure customers from Britain’s four biggest lenders, which control as much as 80 percent of the market. Mortgage lending grew to 27.7 billion pounds, about 9 percent higher than at the end of December. The bank said it expects its net interest margin, the difference between income from lending and the cost of funding, to remain at 160 basis points this year, depending on the timing of any cut in the Bank of England’s base rate.
The shares were up 6.5 percent to 261.9 pence at 9:04 a.m. in London trading.
Virgin Money probably isn’t interested in Royal Bank of Scotland Group Plc’s consumer and small business unit Williams & Glyn, Gadhia said. While her bank may consider acquisitions that “give us real competitive advantage and transform our scale,” it’s “hard to see at this point in time that any of the assets that are available would do that, so we’re focusing on organic growth,” she said.