Wednesday 25 November 2020 8:17 am

Virgin Money profit plummets as it takes £501m charge from coronavirus

Virgin Money has reported a 77 per cent plummet in full-year pre-tax profits as the bank booked a £501m hit from the pandemic.

The Clydesdale and Yorkshire Bank owner reported underlying annual pre-tax profits of £124m for the 12 months to 30 September 30 — a sharp from £539m last year.

Virgin Money booked a credit impairment charge of £501m, up from £153m in the same period last year.

The group said its “substantial” charge for loan losses comes as Virgin Money buckles up for a surge of borrowers falling behind with repayments due to the coronavirus crisis.

While the bank has not yet seen significant arrears, it said the “volatile and uncertain macroeconomic conditions” are set to remain in place until there is a clear path out of the pandemic.

David Duffy, chief executive of Virgin Money, said: “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.”

Virgin Money withheld its final dividend “in light of the current uncertainty as to the economic impact of the Covid-19 pandemic”, even though the group was not explicitly instructed by the Bank of England to do so.

The company said the lingering threat of a no-deal Brexit “would adversely impact the economy further and could lead to a more prolonged downturn and consequent slower recovery”.

However, it said it remained “ agile in managing the emerging risks”, with a balance sheet of £723m.

Virgin Money slimmed its pre-tax losses to £168m, down from losses of £265m the previous year.

Gary Greenwood, investment analyst at Shore Capital said the group was “surprised by the size of the top up given extensions to government support and recent positive vaccine news and suspect a negative read across to the rest of the sector”.

He added: “After a strong run, which has seen the shares broadly treble from their post-Covid low at the start of April, we expect [Virgin Money] may give up some ground today”.