Virgin Money sets aside another £501m for bad loans

David Duffy

Shares of Virgin Money UK fell about 5% on Wednesday after it said its full-year underlying profit before tax fell 77% to £124 million “primarily due” to a £501 million impairment charge it has made against an expected surge in bad loans.

The company, which had previously announced loss provisions of £232 million, said it now has £735 million of provisions on its balance sheet.

“The group has deliberately adopted an updated and more conservative set of economic scenarios and weightings reflecting the uncertain economic outlook and heightened risks ahead …” said the company.

Virgin Money said its balance sheet reflects Covid-19 impacts, lending contraction of 0.7% to £72.5 billion and deposit growth of 5.8% to £67.5 billion.

The group made a statutory loss after tax of £141 million for the 12 months ended September 30 after deducting £292 million of exceptional costs “including £139m of integration & transformation costs, £113m of acquisition accounting unwind and £26m of conduct charges …”

Virgin Money UK CEO David Duffy said: “While we are yet to see any material impacts of the pandemic on the credit quality of our loan book, our results reflect a cautious and conservative approach to the coming period as we refine our assessment of the uncertain economic outlook and the impact of the second lockdown.

“Although the vaccine news is a strong cause of hope for the future, the economic benefits are still some way off when considering the immediate reality of current restrictions and so have not yet been factored into our near-term forecasts. 

“Looking into 2021, we are well underway in rolling out our full suite of Virgin Money products and services across personal and business, underpinned by our unique brand proposition and leading digital capabilities.

“This progress, as well as the steps we have already taken to transform and simplify our business, mean we are well positioned to emerge from the pandemic as an agile, innovative and disruptive force in UK banking.”

About the Author

Mark McSherry
Dalriada Media LLC sites are edited by veteran news journalist Mark McSherry, a former staff editor and reporter with Reuters, Bloomberg and major newspapers including the South China Morning Post, London's Sunday Times and The Scotsman. McSherry's journalism has also appeared in The Washington Post, The Guardian, The Independent, The New York Times, London's Evening Standard and Forbes. McSherry is also a professor of journalism and communication arts in universities and colleges in New York City. Scottish-born McSherry has an MBA from the University of Edinburgh and a Certificate in Global Affairs from New York University.