May 6, 2020 @ 9:30 by Steven Hugill
A North East challenger bank has seen earnings slump amid the coronavirus crisis – but bosses say it remains ready to play a crucial role in the UK’s economic recovery.
Virgin Money’s half-year profits fell by more than half as the impact of COVID-19 weighed on activity.
The figures – revealed today (Wednesday, May 6) – were particularly impacted by a £232 million provision to cover future loan losses caused by the coronavirus pandemic.
It meant underlying pre-tax profit fell to £120 million in the six months to March 31, which represented a 58 per cent drop on the £286 million recorded in the same period a year ago.
However, officials at the company, which runs operations from an office in Gosforth, say the lender remains “well-placed to help customers and colleagues through the crisis (and) play our part in the UK’s economic recovery.”
Revealing it has already supported more than 100,000 retail clients and around 4500 businesses during the coronavirus emergency, chief executive David Duffy hailed its resilience in a turbulent market.
He also said the bank’s reputation as a market innovator – a key USP as it challenges the UK’s established lending hierarchy – means Virgin Money is primed to prosper as customer behaviour changes on the back of coronavirus.
He said: “The COVID-19 outbreak and its impact on the nation’s businesses and consumers has markedly changed the operating environment (and) our primary objective now is safeguarding the health and well-being of our colleagues, customers and communities while also protecting the bank.
“We enter this period from a position of strength, with a defensive loan book and resilient capital position, meaning we are well-placed to help our customers and colleagues through the crisis.
“We have rapidly adapted our operations, products and services and I am extremely proud of how our colleagues have risen to the challenge.
“Amid the uncertainty, it is clear the pandemic will have long-lasting and wide-ranging effects on how companies do business and on what customers will expect from the organisations.
“Although the full impacts from the COVID-19 outbreak will take time to emerge, I’m confident our agility, digital capabilities and focus on disrupting the status quo will make us stronger and well-equipped to support changing customer needs and play our part in the UK’s economic recovery.”
Laying out the company’s performance across its main banking divisions, David revealed business lending grew 5.7 per cent in the period to £8.3 billion, with personal lending up by 6.2 per cent to £5.3 billion.
However, mortgage lending was down 0.9 per cent to £59.5 billion, a result David said came on the back of a “disciplined approach to margin management.”
The bank last year unveiled plans for a digital disruption hub at its Gosforth offices, which it said at the time would deliver more than 200 jobs by the end of 2020.
The endeavour – earmarked to create new jobs and provide work for existing staff – is aimed at propelling innovation and improvements to the way the bank serves mortgage and business banking customers.
Virgin Money was previously taken over by CYBG Group in a £1.7 billion deal.