Virgin Money goes against grain with profit slide as bad loan provisions jump

Virgin Money, the Glasgow-headquartered banking group, saw its shares come under pressure after it posted a fall in half-year profits amid increased provisions for potential bad loans.

The group, which has largely phased out its historic customer-facing Clydesdale Bank and Yorkshire Bank brands, reported a pre-tax profit of £236 million for the six-month period to the end of March, down 25 per cent from a year earlier. It comes as rivals such as Lloyds Banking Group and NatWest have recently posted higher earnings.

Chief executive David Duffy said: “While the past six months have seen turbulence in the economy and in the financial system, we have continued to focus on our target areas, growing customer numbers and deposits thanks to our new and existing digital products. Further customer-centric product launches are coming in the second half of the year. We have a strong capital position and we’ve significantly grown pre-provision profit, while continuing our prudent approach. As the UK economy stabilises in the months ahead, we have a high degree of confidence in our long-term plans.”

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He added: “Pleasingly for now, the number of customers in financial distress remains low, but we continue to expect arrears numbers to increase as the credit cycle normalises.”

RBC Capital analyst Benjamin Toms noted: “Virgin Money is in the middle of the pack when it comes to interest rate sensitivity and excess capital, and we are not quite sure if this bank is branch or digital led. It feels like a lot of investment is still required to compete with large UK peers.”



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