Tuesday 28 February 2017 5:15 pm

Virgin Money chief exec Jayne-Anne Gadhia: Brexit made us shelf plans for small business banking, but it might have worked out in our favour

A series of unforeseen events means Virgin Money might be better off after having to drop a deal to go into small business banking because of Brexit.

The challenger bank had been due to acquire an asset finance business, which would have allowed it to expand its offering into small business banking, but changed its mind after the UK voted to leave the EU last June.

"Before the Brexit vote, we were just about to sign the deal to acquire a small and medium enterprises business and we decided not to do that because of the uncertainties of Brexit and we haven't gone back into that particular field yet," Virgin Money's chief executive, Jayne-Anne Gadhia, told City PM "Now, that, of course, might be really good timing, because RBS has now announced rather than selling Williams & Glyn, they are likely to support challenger banks and their own business banking opportunities.

"So, it may very well be that's the right way for us to get into small business banking, rather than through acquisition as we'd originally thought."

RBS, which reported last week it was in the red for the ninth year running, recently revealed that, rather than selling Williams & Glyn, it might instead be allowed to set up a fund to support small business banking at challengers.

The taxpayer-backed lender was told to ditch Williams & Glyn as part of its £45bn bailout deal.

However, Gadhia, an RBS veteran herself, added she would "reserve judgement" on whether her firm would be using the fund until more information was available.

"In principle, we want to understand what it looks like and, if it's going to bring advantage to our customers and our shareholders, then we'd like to participate in it," she said.

Virgin Money also reported its annual results for 2016 this morning, revealing statutory profits before tax of £194.4m, up 41 per cent compared with £138m in 2015. Meanwhile, total income had increased to £586.9m, up 12 per cent compared with £523.5m.

Gadhia said she was "delighted" with the figures.

Despite this, shares in the bank closed down 2.3 per cent at 327.3p.

As a UK-centric lender, Virgin Money's financial fate is, to some extent, tied to that of the UK economy, which many feared would be hampered following the Brexit vote.

"Before the Brexit vote, I was concerned about what might happen to the economy going forward and it has definitely surpassed my expectations," Gadhia said. "Consumer behaviour has been solid."

It was also revealed late last year that Virgin Money had teamed up with 10x Future Technologies, the fintech startup of former Barclays boss Antony Jenkins, to build a new digital banking platform. Gadhia said the intention was to have this "live before the end of the year".