Shares of Glasgow-headquartered Virgin Money UK plc fell as much as 7% on Thursday after it said its profit before tax fell 42% to £345 million in the year to September 30, 2023, below analyst forecasts of £430 million, “reflecting higher impairments and adjusting items.”

Virgin Money UK reported a credit impairment charge of £309 million.

“Credit impairments of £309m (2022: £52m) were significantly higher year-on-year, mainly reflecting higher modelled expected credit loss (ECL) given updated macroeconomic assumptions and bureau data, in anticipation of a continued increase in arrears, resulting in an increased level of provision coverage overall,” said the company.

The company also announced a share buyback to repurchase up to £150 million of stock.

Virgin Money UK shares are down about 22% in 2023.

The company said it will spend £130 million over three years “as we deliver our response to the emerging risks and technologies, including AI, in the evolving financial and cybercrime space.”

Total customer lending was steady at £72.75 billion and deposit balances grew 2% to £66.6 billion.

Total underlying operating income for the year rose 8% to £1.87 billion.

Virgin Money UK CEO David Duffy said: “We made good progress executing our strategy in 2023, growing both our relationship customer base and target lending segments.

“With the momentum we carry into 2024, we are confident in the outlook for our business and we expect to deliver around £800m in distributions to our investors by the end of the three-year period ending in 2024.

“Under the Virgin brand, our ambition is to create the UK’s best digital bank.

“To help achieve this goal, we are stepping up investment in our technological capability to future proof our business and protect our customers from the growing risk of fraud strategies driven by advances in AI.”