Virgin Money, a high street lender, returned to profit in the first half of the year after reserving less for bad debts as the economy recovered from the lockdown (Virgin Money).
Posted by Holly Williams , assistant city editor in PA
Virgin Money, a high street lender, returned to profit in the first half of the year after spending less on bad debt as the economy recovered from the deadlock.
The group – formerly known as CYBG – posted pre-tax profit of £ 72 million for the six months ended March 31, compared to a loss of £ 7 million last year.
On the underlying basis, pre-tax interim profit has been GBP 120 million last year more than doubled to GBP 245 million.
Profits increased as bad debt impairment losses were at the same level as last year from GBP 232 million At the point of the initial lockdown, it fell to £ 38m, which offset lower retail revenues from the rock bottom interest rates.
However, it did not follow the lead of larger banking rivals Lloyds Banking Group and HSBC, part of last year’s credit losses instead of keeping the provisions at GBP 721 million.
The Payment Protection Insurance (PPI) scandal required a further GBP 59 million after a higher number of internal reviews of complaints led to disbursements.
The group also missed out on the mortgage boom that kicked off many of its competitors during the first quarter of the stamp tax vacation. The mortgage balance was unchanged at £ 58.3 billion.
It said it chose to focus on profit margins rather than pursuing higher mortgage sales, but it has started to boost lending, with lending between February and March was up 50%.
Personal lending fell 3.2% to £ 5.1 billion in the first half as households held back their spending and instead saved. Corporate lending was also down 0.6% to £ 8.9 billion.
The Group’s net interest margin – a key performance measure for retail banks – declined on record lows in interest rates.
On an improving picture However, the full year margin outlook was raised as the economy is expected to rebound strongly after the last freeze, although stocks are still down 5%.
David Duffy, chief executive officer of Virgin Money, said, “We are cautious optimistic about improving outlook as the impact of the UK vaccination program positively revises economic expectations.
“We are still managing with an uncertain economic environment, but the bank is well positioned and has a strong balance sheet.”
The group said the “vast majority” of its Clydesdale and Yorkshire Bank locations had been renamed under the Virgin Money banner
Last fall, plans to close or merge 52 branches were pushed forward to shift the focus from lending to digital services.
Mr Duffy said, “We are now at a turning point for that Business. We want to become a leading digital bank backed by a physical footprint. “
But he added the group has” no additional plans to do anything in the industry “in 2021.
John Moore, Senior Investment Manager at Brewin Dolphin, said, “The question is, what will be the next big step for this developing bank – whether that be in the form of accelerating investments in digital and fintech, buying small books with mortgages and Lending takes place. Or consolidation and cost reduction within the existing business. “
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