Virgin Money has reported a loss of £141m after booking a charge of more than £500m for loan losses amid the pandemic.
The bank – which has major centres in Glasgow, Newcastle and Leeds, and is re-branding its Yorkshire and Clydesdale bank brands to Virgin Money – said its results reflected the “unprecedented deterioration in the economic environment.”
It recorded a credit impairment charge of £501m, which is said reflected a “cautious approach to an uncertain economic environment”. Its overall income fell from £1.64bn last year to £1.54bn.
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.
The bank hailed a 13.6% increase in business lending growth, driven mainly by £1.2bn of loans through the Government-backed CBILS and Bounce Back lending schemes.
But it said personal lending had seen lower demand in the second half of the year and mortgage lending had fallen by 3%, while customer deposits grew by 20.3% as many people and businesses looked to save in the short term.
The company's underlying profit of £625m was 10% lower than last year, and though operating costs were reduced by around £30m, almost half of that saving was swallowed up with increased costs linked to the pandemic.
A profit of £124m before tax became a statutory loss after tax of £141m, which included £292m of exceptional items linked mostly to the 2019 takeover of Virgin Money by CYBG.
Virgin Money CEO David Duffy said the bank was "cautious in the interim and optimistic in the medium term".
He said: "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.
"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.
"Looking into 2021, we are well under way 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 Ƶ banking."
The bank has this year announced 700 job cuts and a number of bank closures as part of a plan announced at the time of the Virgin Money merger to reduce staffing by around 16%.
The bank is not paying a dividend this year but indicated that it hoped to return to a dividend and would look at the situation next year.
