Virgin Money UK PLC (LON:VMUK) has increased its provisions for bad debt from the coronavirus pandemic lockdown in the past quarter, though it said it has not yet seen any significant coronavirus-specific credit losses.
The renamed Clydesdale and Yorkshire Banks, which merged with Virgin Money two years ago, has updated its impairment model to incorporate more cautious economic scenarios and the 67,000 mortgage and 53,000 personal payment holidays it has granted.
This has resulted in a “prudent” £42mln net increase in its provisions, primarily in mortgages and personal banking, which it said is “based on cautious economic assumptions”, after taking £232mln of charges in the previous quarter.
The lender said it has “not yet seen any significant credit losses nor been required to make any significant specific provisions in relation to the pandemic impact” but is “preparing assiduously to manage higher levels of customers in financial difficulty and continues to closely monitor the performance of its portfolios”, with chief executive David Duffy saying “we know that things may yet get more difficult for many of our customers”.
Things were mixed for the lender itself in its third quarter to June 30, 2020, with the group’s mortgage portfolio down 1% and personal lending down 2.7%, while combined personal and business deposits increased 4.8% to £67.7bn and business lending grew 5.7% amid significant demand for the government-backed lending schemes.
The group’s net interest margin (NIM), the difference between rates on loans and savings, declined to 1.47% in the third quarter, down from 1.63% in the second quarter and 1.60% in the first. Management continues to expect a full-year NIM of 1.55%-1.60%.
Shares in the bank rose 2% to 99.24p in early trading on Tuesday.
Published at Tue, 28 Jul 2020 07:21:00 +0000-Virgin Money says ‘we know things may get more difficult for many customers’