Vicky Hartley (VH): Are you likely to make a splash with the first Virgin Money branded mortgage range or will it be business as usual?
Jayne-Anne Gadhia (JAG): Our plans are to challenge mortgage market norms. Over time that will bring change. For example, our new range of savings accounts are not bonus-led, therefore don’t rely on customer apathy to make money and the products commit to the same rate for the whole period. But before launch I was asking our marketing team, is this edgy enough?
The One Account was the first mortgage product to calculate interest on a daily basis. That seemed like a small thing at the time, but saved customers a huge amount of money. We hope over time to be able to develop and re-launch our next generation, re-branded version of The One Account, after its sale to Royal Bank of Scotland. That product was a real success for us, for intermediaries and from a customer perspective.
VH: What’s your timeline for the mortgage relaunch under the Virgin Money brand?
JAG: All products will have been rebranded to Virgin Money by 30 June. But we’re already in the intermediary mortgage market through Northern Rock and running 170% ahead of projections so far this year. I hope intermediaries have found that despite this significant increase in volume we’ve kept service levels up. I approved 24 new recruits to our operational headquarters the Gosforth office last week.
VH: Northern Rock distributes 90% of its products through intermediaries. Will Virgin use the same model?
JAG: We expect distribution to remain at 90% through intermediaries, but of course, we want to grow through all our channels. However, pricing will remain the same through both because it’s really important for clients who have been introduced by an adviser not to feel short-changed and we want to recognise the relationship with the adviser. We want to enhance services through both channels, but we know intermediaries are absolutely key to the business we have acquired.
VH: How are you going to differentiate yourselves as an intermediary lender?
JAG: Good clear products and excellent service. Over the years Northern rock has been seen as a good intermediary partner. We are focused on the personal relationships we will develop with our direct customers and plan to do the same with intermediaries. We want to serve the intermediary community properly with new technology without reducing the number of personal contacts available. We will also make sure real-time information is available, alongside fast creditworthy decisions, while moving the pipeline through quickly. I suppose this is the sort of thing all lenders would say, but the difference with us is we have the opportunity to develop the systems to deliver it.
VH: Do you plan to make any personnel changes at Northern Rock?
JAG: No – there are none planned. Richard Tugwell has been the name at Northern Rock for a long time. We know these relationships are important and we want to keep them for the long-term.
VH: Can you confirm suggestions Northern Rock/Virgin plans to do in the region of £7.5bn mortgage lending in 2012, up from £4.5bn last year?
JAG: That’s in the ball-park if you look at our current run-rate. In fact we’re ahead of our plans and if lending continues at that rate we could exceed them.
VH: How ambitious are your lending plans in the short-to-medium term?
JAG: I was looking at Nationwide’s annual results and said to my team, this is the model we should follow in terms of the shape and proportion of their balance sheet, if not in terms of scale. We are aiming for good, solid, steady growth.
VH: Can new lenders like Tesco coming shortly, and Virgin ever live up to the expectation?
JAG: Whenever I’m asked this I wish I could come up with a clever, innovative answer. But we have a limited legacy and we are able to change expectations in a way the big banks can’t. They are constrained by their size and the number of companies within the group, whereas we are a private company and our shareholders also have realistic expectations. We can provide new products and services and the difference is that we plan to invest in that and our service proposition. We want to be the lender and bank of choice, hence the advert strapline on building a better kind of bank.
VH: What’s Richard Branson like to work with?
JAG: Richard Branson is very demanding and also very clear on what the customer wants. He rings at least once a week with new ideas about the customer. His last call was about first-time buyers, products and ways we can help people get on the housing ladder. He’s always about the new challenge. My pushback to him is that we have to get all the ducks in a row before we start developing new ideas.
I have worked for both Fred Goodwin and Richard Branson now though, so when people ask, I tell them the difference between the two is this. If I were setting up a new bank with Goodwin, in the early weeks he would have told me what to do. Branson just rang every day to ask what he could do to help. That’s the difference.