Virgin Money said it had returned a “pretty strong result in a difficult environment” though profits dipped as it put aside £52m for expected loan losses in the cost-of-living crisis.
The bank - which has offices in Newcastle, Glasgow and Leeds - has issued full year results for the year to September 30 showing total underlying operating income increasing 12% to £1.755bn. But underlying pre-tax profits fell slightly to £789m, down 1% from £801m the previous year.
The company said it had put aside £52m to cover possible borrower defaults as the UK faces into a prolonged recession due to the cost crisis, while the previous year it released £131m of loan loss impairments built up during the pandemic. Virgin Money said it had not yet seen signs of an increase in borrowers defaulting but is keeping a buffer of provisions due to the worsening economic outlook.
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It reported overall lending growth of 0.8% over the year to £72.6bn while it also upgraded its net interest margin outlook – a key measure of performance for retail banks – for the year ahead due to sharply rising interest rates in the UK. Chief executive officer David Duffy said the company’s performance was a “pretty strong result in a difficult environment”.
He said: “2022 has been a milestone year for Virgin Money. We have good momentum while delivering a strong performance and improved returns for our shareholders. We’ve changed the game in purpose-led flexible working to create an engaged, high-performing organisation that’s cost efficient and agile, which will underpin targeted growth through further digital innovation.
“While we have solid credit quality across our lending, we are aware that some customers will have to make difficult decisions in this environment, and we are proactively offering them help and support.”
Mr Duffy said Virgin Money had given its staff a pay rise of 10%, as well as a £1,000 cost-of-living payment to most workers. He said the bank had no plans for redundancies, despite plans for cost savings in the coming year.
He announced a dividend of 10p per share, plus an additional share buy-back of £50m, taking that programme to £125m.
Mr Duffy said the bank would be looking in the current year at what it would do with the portion at its Newcastle office that it last year closed as it moved to a more flexible working model. But it said the site on Tyneside remained "core" to its operations and it had "no negative plans" for the site.
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