When Jayne-Anne Gadhia returned to Virgin Money in February after five years with Royal Bank of Scotland (RBS), charged with ramping up sales of financial products, she could hardly have imagined that a chance to short-circuit a process that would have taken years would arrive only a few months later.
Northern Rock has named Sir Richard Branson’s Virgin Group as its preferred buyer. In the past week, the Government’s auction of the beleaguered company has unravelled: JC Flowers, the American private equity firm, said it will no longer compete and a bid from Cerberus, the US private equity company that recently bought Chrysler, also hangs in the balance. This leaves only Olivant, an investment group run by Luqman Arnold, the former Abbey boss, standing between Gadhia and her goal of transforming the Virgin Money business overnight.
If Virgin’s audacious plan to rescue Northern Rock succeeds, Gadhia will become chief executive of a FTSE 100 mortgage business with 6,000 staff. There is, however, a huge gulf between this and the job she does at Virgin Money, which employs 240 staff and has a turnover of £200m. Compare this to the £600m profit that Northern Rock made in 2006 and it is not hard to see why questions have been raised as to whether she is “heavyweight” enough to front Virgin’s bid.
But Gadhia counters: “Until recently I managed RBS’s £70bn-plus mortgage book with several thousand employees. I also have a strong management team around me with the depth of knowledge, experience and tenacity to rebuild the Rock.”
Gadhia describes herself as “driven, determined, with bags of energy, measured, pragmatic and, most important, when I say I will do something, you can be sure it will be done”. Born in the West Midlands in 1961, Gadhia is an only child. Her father’s electrical business took the family to Norfolk, where she grew up. She read history at London University, where she met her future husband; the couple now have a young daughter. She followed her degree with three years at Ernst & Young in Norwich, training to be a chartered accountant. Once qualified, she worked in the unit trust and PEP department of Norwich Union.
After Black Monday’s stock market collapse in 1987, her role changed to marketing director for Norwich Union’s unit trust business. After a successful spell, she was put in charge of resurrecting the bank’s network of sales agents after regulators shut down its direct sales business in 1994.
Gadhia says that once she had got the sales force back on the road she wanted a fresh challenge and was inspired to work for Sir Richard Branson after reading an article about him in Hello! magazine. She was introduced to Rowan Gormley, who was setting up Virgin’s financial services arm, and together they launched Virgin Direct.
Gadhia was operations director of Virgin Direct, presiding over the instantly successful One account flexible mortgages. When RBS bought the venture in 2001, Gadhia joined the company and became managing director of consumer finance and later mortgages with responsibility for RBS, Natwest, One account and First Active mortgage business. It is this experience that Gadhia points to when critics question her stature.
Many who know Gadhia have no doubt that she is capable of making the quantum leap from running Virgin Money to taking control of a rebranded Northern Rock.
Beattie McGuinness Bungay partner Andrew McGuinness, who knows Gadhia personally, says: “She’s extremely driven, creates enormous loyalty in those working for her and has a sharp intellect. She is a leader and whether you’re leading 400 people or 40,000, those qualities are what counts and she has them in spades.” Others are less convinced. One industry source says: “I think her reputation in a financial context is as a networker, as opposed to someone who is commercially astute.”
The addition of Sir Brian Pitman, former chairman of Lloyds TSB, as chairman of the venture undoubtedly adds gravitas to Virgin’s bid. Pitman initially resisted any role running the bank but later relented, dismayed at the idea of a British bank failing. Gadhia says that the Virgin brand brings with it close to 100% name recognition and points out that before Virgin ever expressed an interest in Northern Rock, Branson was named as the person most likely to resolve the crisis.
Interbrand chairman Rita Clifton agrees, adding: “Due to the situation, this is not something that will be sorted by any old business and any old person running it. There has been an erosion of trust and what is needed is a rescuing brand that brings a level of trust and integrity.”
But some industry insiders point out that the Virgin brand has suffered a series of setbacks recently. One says: “Virgin Media is deemed to be something of a damp squib, Virgin Trains has lost the East Coast and Cross Country franchise bids and is now a much smaller organisation and Virgin Atlantic is not bringing the same challenge and energy to the market that it once did. If Virgin is to take over Northern Rock, it will have to offer something discernably new in consumer banking. Virgin has always thrived when it has challenged the product norms. It’s not good enough just to use the Virgin brand as some kind of plaster to stick over the wound.”
City analysts recognise that the Virgin brand is an asset but question its value in this context. Alex Potter, banks analyst at Collins Stewart, says: “The Virgin brand certainly helps but Northern Rock does most of its mortgage business through intermediaries, and intermediaries don’t care too much about brand names. They care about the fact you are in the market consistently, you offer consistently good prices and that you service them with quick answers and an easy-to-use interface.”
The Government will decide early in the New Year who has won the race for Northern Rock and the victor will then have to deal with what Lucian Camp, chairman of financial services agency CCHM:Ping, describes as a ”complicated mess”.
Gadhia may soon have the chance to fulfil her ambition to “make a difference” but as one City analyst puts it: “It’s such a desperate situation that, if Bill and Ben the Flowerpot Men turned up and offered shareholders £3 a share, they’d take it – full stop.”