The Glasgow-headquartered group, which also owns the Yorkshire Bank and is undertaking a major rebranding of both names, also added a further charge of £49 million to the cost of compensation over the PPI scandal following a higher level of internal reviews into complaints leading to payouts.
The group – formerly known as CYBG – said it had finished the final processing of all complaints by January 25, with a total of 740,000 received and a processing cost of £3.1 billion.
In the three months to the end of 2020, customer deposits rose almost 1 per cent to £68.1bn as customers spent less and businesses maintained healthy balance sheets to get through the pandemic.
Mortgages dipped 0.2 per cent to £58.2bn and personal lending fell 2 per cent to £5.1bn.
The latest results showed that business lending edged up 0.1 per cent to £8.9bn, although the UK government-backed lending schemes remained popular as new lockdowns and restrictions saw firms take on more debt to see through the winter.
Bounceback loans increased by 14 per cent and bigger Coronavirus Business Interruption Loan Scheme (CBILS) and Coronavirus Large Business Interruption Loan Scheme (CLBILS) facilities rose 19 per cent.
Chief executive David Duffy said the quarter was positive, including returning to a statutory profit in the period.
He added: “Given the current UK-wide restrictions and ongoing uncertainty, we maintain the cautious economic outlook we outlined in November and our full-year guidance remains broadly unchanged.
“Looking ahead, the vaccine rollout and EU trade deal are encouraging for the UK’s economic recovery and we remain focused on disrupting the market through a variety of innovative new products and propositions with a customer and brand experience that is the best in the market.”
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 Clydesdale and Yorkshire branches under the Virgin Money banner.
Gary Greenwood, an analyst at brokerage Shore Capital, said: “Virgin Money’s trading update reports a profitable first quarter (having made a statutory loss in each of the last three financial years) with resilient pre-provision earnings and a low cost of risk.
“Full-year guidance has been reaffirmed and so we do not expect to make any changes to our forecasts at this stage.”
The bank said it had seen higher customer spending prior to stricter Covid-19 restrictions introduced in November and December, but this fell back as tiering and lockdowns were introduced.
Virgin Money added it was continuing to support customers with payment holidays, although it revealed the number of active holidays has fallen.
It noted: “The proportion of customers requiring further support upon exiting their payment holiday has increased modestly, as anticipated, and remains within the level assumed in our provision.”
A total of £12.1bn in mortgage payment holidays had been granted – or 21 per cent of balances, with £600m currently active. Around 98 per cent of previous payment holidays have now been repaid.