The Glasgow-headquartered group, which also owns the Yorkshire Bank, reported underlying full-year, pre-tax profits of £124m for the year to September 30, down 77 per cent from the £539m posted the previous year.
The group – formerly known as CYBG – said its “substantial” charge for loan losses comes as it prepares for a surge of borrowers falling behind with repayments due to the coronavirus crisis.
It said it has not yet seen significant arrears, but took the charge to reflect the “highly uncertain” economic outlook and the fact restrictions are set to remain in place for some time.
On a statutory basis, the group saw pre-tax losses narrow to £168m, from a deficit of £265m the previous year.
Chief executive 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.”
He added: “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.”
The group is working through a previously announced restructuring which involves the closure of some branches and the merging of others, as well as rebranding all Clydesdale and Yorkshire branches under the Virgin Money banner, by the end of 2021. It is also cutting some 300 jobs.
Gary Greenwood, an analyst at brokerage Shore Capital, said: “Adjusted profitability is slightly below consensus and materially below our forecast due to higher-than-expected impairments as the group has factored in the potential near-term economic impact of the second [English] lockdown.
“We are surprised by the size of the top up given extensions to government support and recent positive vaccine news and suspect a negative read across to the rest of the sector.
“After a strong run, which has seen the shares broadly treble from their post-Covid low at the start of April, we expect [Virgin Money] may give up some ground.”
Duffy added: “It has been an extraordinary year of disruption for all of us. 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.
“I’m proud of the way we’ve adapted how we work this year to continue serving our customers, while looking after our colleagues and protecting the bank for the future.”