Virgin Money predicts increase in bad loans

Profits at Virgin Money more than halved in the first half of its financial year, with impairment charges in the six months to March tripling to £232 million, from £77 million a year earlier.

The firm’s underlying pre-tax profit was down from £280 million to £120 million, with statutory net profit of £22 million higher than the year earlier period.

Meanwhile, Virgin Money has blocked around 32,000 credit card accounts, advising affected customers that it had reviewed their financial positions and decided to stop any further spending.

David Duffy, Chief Executive Officer said “The COVID-19 outbreak and its impact on the nation’s businesses and consumers has markedly changed the operating environment, driving an increased impairment charge of £232m against future loan losses and a reduction in underlying profitability. While we delivered a resilient performance and continued to make good progress on our self-help strategy in the first half of the year, our primary objective now is safeguarding the health and well-being of our colleagues, customers and communities while also protecting the bank.”

“We enter this period from a position of strength, with a defensive loan book and resilient capital position, meaning we are well-placed to help our customers and colleagues through the crisis. We have rapidly adapted our operations, products and services and I am extremely proud of how our colleagues have risen to the challenge and continued to provide the very best support and advice to our customers. To date we’ve directly supported over 100,000 retail customers and around 4,500 businesses. We continue to work closely with Government, regulators and the industry to ensure we maximise our support to customers and the UK economy.”

“Amid the uncertainty, it is clear that the pandemic will have long-lasting and wide-ranging effects on how companies do business and on what customers will expect from the organisations they choose to interact with. Although the full impacts from the COVID-19 outbreak will take time to emerge, I’m confident that our agility, digital capabilities and focus on disrupting the status quo will make us stronger and well-equipped to support changing customer needs and play our part in the UK’s economic recovery.”

Separately, credit rating agency Fitch has warned that Britain’s five largest banks could report between £17 billion and £25 billion of loan losses this year after the lenders revealed £7 billion in credit losses for the first quarter.

Fitch said in it’s research note that based on indications by some of the banks in their first-quarter 2020 results announcements, we expect that full-year provisions could be 2.4 to 3.6 times higher than the first quarter.