Online bank Virgin Money, which has offices in Newcastle and Leeds, has revealed that it has set £52m aside for anticipated loan defaults due to the cost-of-living crisis.
The bank stated in its full year results to September 30 that it has returned strong results despite the difficult trading environment. Underlying operating income increased 12 per cent to £1.755bn, while pre-tax profits fell slightly to £789m, down one per cent from £801m the previous year.
The company added that it had put aside the £52m to cover possible borrower defaults as the UK faces the possibility of prolonged recession. The previous year was little more optimistic as it released £131m of loan loss impairments built up during the pandemic.
Virgin Money noted that it had not yet seen signs of an increase in borrowers defaulting but is keeping a buffer of provisions due to the economic outlook.
It reported overall lending growth of 0.8 per cent over the year to £72.6bn while it also upgraded its net interest margin outlook for the year ahead due to sharply rising interest rates in the UK.
Chief executive officer David Duffy said: “2022 has been a milestone year for Virgin Money. We have good momentum while delivering a strong performance and improved returns for our shareholders. While we have solid credit quality across our lending, we are aware that some customers will have to make difficult decisions in this environment, and we are proactively offering them help and support.”
Duffy added that Virgin Money has given staff a 10 per cent pay rise this year, as well as a £1,000 cost-of-living payment to most workers. He said the bank had no plans for redundancies, despite plans for cost savings in the coming year.