Virgin Money reveals 10% pay rise for thousands of staff but warns of 'volatile environment’

Virgin Money, the Glasgow-headquartered banking group, has revealed a close-to-inflation pay rise for the majority of its 7,500 staff as it notched up a 43 per cent hike in annual profits.

The group said it is giving most workers a rise of around 10 per cent on average to help them cope with the soaring cost of living, which comes on top of a £1,000 payment in August. The pay hike, which was announced internally earlier this month, will be made in two instalments, the first in January and the second in July, with staff being paid between 9 per cent and 11 per cent extra.

The group, formerly known as CYBG, the owner of the historic Clydesdale and Yorkshire bank names, has also launched a cost-of-living hub to help offer support to customers in financial distress but said it has not yet seen signs of an increase in borrowers falling behind with their repayments. But the lender stressed it was “carefully monitoring” its customer base and set aside £52 million to cover borrower defaults as the UK faces a prolonged recession due to the cost-of-living crisis. This compares with a £131m release the previous year of loan loss impairments built up during the pandemic.

Virgin Money’s annual results showed statutory pre-tax profits jumped to £595m for the year to September 30, from £417m the previous year, thanks in part to rising interest rates boosting profit margins. On an underlying basis and stripping out costs such as restructuring charges, annual profits dipped 1 per cent to £789m.

Victoria Scholar, head of investment at financial group Interactive Investor, said: “In May, Virgin Money shares slumped heavily despite reporting an increase in half-year profits. However, the story today is very different with the lender returning cash to shareholders while the CEO said the company is offering proactive help and support for customers in this environment.

“Other lenders this earnings season including Nationwide Building Society last week have warned of the risk of rising defaults and increased bad loans, highlighting the rising risk of recession and broader macroeconomic pressures on inflation that are squeezing household budgets.”

Virgin Money chief executive David Duffy told investors: “The macroeconomic outlook has become more uncertain over the course of the year. Following a positive recovery in expectations post-Covid, recent events have seen forecasts deteriorate. As we enter a more volatile environment, with higher inflation and rates, we are carefully monitoring for any impacts.”

The group said it was seeing the impact of rocketing inflation on banking customers, with its data showing spending has soared by 16 per cent on groceries and 57 per cent on energy bills. It reported overall lending growth of 0.8 per cent over the year to £72.6 billion while it upgraded its net interest margin outlook - a key measure of performance for retail banks - for the year ahead due to rising interest rates in the UK. The group said mortgage lending remained stable at £58.2bn, having returned to growth in the second half of the financial year.