Virgin Money ‘well positioned to emerge from pandemic’ despite losses

A North East bank has recorded £141 million losses after booking a £501 million charge to help deal with the challenges of the COVID-19 pandemic.

Virgin Money says its impairment charge reflects the “unprecedented deterioration in the economic environment”, with bosses preparing for a sharp rise in borrowers struggling to meet repayment windows.

However, officials say the lender, which runs operations from an office in Gosforth, remains “well positioned to emerge from the pandemic as an agile, innovative and disruptive force in UK banking.”

According to results released today (Wednesday, November 25) covering the year to September 30, Virgin Money suffered a statutory post-tax loss of £141 million.

Additionally, underlying pre-tax profit was 77 per cent worse off on a year-on-year basis at £124 million.

Stressing the difficult environment in which it is operating, chief executive David Duffy described 2020 as being “an extraordinary year of disruption”.

However, pointing to the roll out of new products and steps taken to streamline operations for customers, he said the bank’s reputation as a market innovator – a key USP as it challenges the UK’s established lending hierarchy – leaves it well placed to succeed post-COVID-19.

He said: “Our priority has been to support our customers and colleagues through this period, and we will continue to do so during the challenging economic environment ahead.

“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 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.”

According to its results, lending contracted by 0.7 per cent in the period to £72.5 billion, with deposits growing 5.8 per cent to £67.5 billion.

Business lending grew 13.6 per cent to £8.9 billion, due to £1.2 billion of Government-backed lending, with relationship deposits up 20.3 per cent to £25.7 billion.

With the latter, officials say consumer savings increased significantly under lockdown, with businesses generally depositing proceeds from Government-guaranteed lending into short-term cash accounts.