Challenger bank Virgin Money says customer deposits increased and personal loans fell in first quarter trading, as the Covid-19 pandemic left customers cautious over spending.
The high street lender, which returned to profit in the last three months of 2020, said customer deposits rose by 0.9% to £68.1bn, while personal lending fell by 2% to £5.1bn, as customers remained guarded over their finances.
The bank - which has major centres in Glasgow, Newcastle and Leeds - also revealed it has added an extra charge of £49m to the cost of compensation over the PPI scandal following a higher level of internal reviews into complaints leading to payouts.
It processed the last one on January 25 and in total dealt with 740,000 complaints at a cost of £3.1bn.
The Newcastle based bank, , which is re-branding its Yorkshire and Clydesdale bank brands to Virgin Money, added that mortgages in the period dropped 0.2% to £58.2bn and business lending was up 0.1% to £8.9bn.
Government-backed bounceback loans increased 14% and larger coronavirus business interruption loan scheme (CBILS) and coronavirus large business interruption loan scheme (CLBILS) increased 19%. The business added it returned to profitability during the period.
The bank said there were early signs of some recovery in customer spending before tighter Covid-restrictions were imposed.
However, the combination of the most recent restrictions and customers’ caution in the context of the economic outlook resulted in continued inflows, with the the increase in deposits seeing the loan-to-deposit ratio fall to 106%, down on the 2020 full year figure of 107%.
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The total loan book declined by 0.3% to £72.2bn as the group continued to focus on margin management, prudent underwriting and supporting customers in a continued uncertain environment.
Overall, it said the economic outlook remains highly uncertain, adding: “Given the extension of Government support measures it will be further into (2021) before greater clarity emerges.
“As a consequence, Virgin Money 海角视频 continues to adopt a cautious view on economic assumptions and this is reflected in coverage levels, underwriting standards and liquidity levels.”
Chief executive officer David Duffy said: “Virgin Money had a profitable and positive first quarter and continued to prioritise our customers and colleagues through this uncertain external environment including through payment holidays and Government lending schemes.
“We have made a good start to the year with the launch of new customer propositions, further roll-out of our rebrand programme and a return to statutory profit, while maintaining a disciplined approach.
“The group remains strongly capitalised and we have good momentum as we look out into the remainder of the year.
“Given the current 海角视频-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 roll-out and EU trade deal are encouraging for the 海角视频’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.”
Last November Virgin Money reported a loss of £141m after booking a charge of more than £500m for loan losses.