Virgin Money reveals 10 per cent pay rise for staff as profits jump

The group said it is giving most workers a rise of around 10 per cent on average to help them cope with soaring inflation, which comes on top of a £1,000 cost-of-living payment in August.

The pay hike, which was announced internally earlier this month, will be made in two instalments, the first in January and the second in July, with staff being paid between 9 per cent and 11 per cent extra.

The company has also launched a cost-of-living hub to help offer support to customers in financial distress but said it has not yet seen signs of an increase in borrowers falling behind with their repayments.

But the lender stressed it was “carefully monitoring” its customer base and set aside £52m to cover borrower defaults as the UK faces a prolonged recession due to the cost-of-living crisis.

This compares with a £131m release the previous year of loan loss impairments built up during the pandemic.

Virgin Money’s annual results showed statutory pre-tax profits jumped to £595m for the year to September 30, from £417m the previous year, thanks in part to rising interest rates boosting profit margins.

On an underlying basis and stripping out costs such as restructuring charges, annual profits fell 1 per cent to £789m.

David Duffy, Chief Executive Officer, 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. We’ve changed the game in purpose-led flexible working to create an engaged, high-performing organisation that’s cost-efficient and agile, which will underpin targeted growth through further digital innovation.”

“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."

In a statement, Virgin Money said: “While not directly exposed to (the war in) Ukraine, we have seen second-order impacts on the broader UK economy from higher costs, higher interest rates and potential pressure on our customers and asset quality. At present, credit quality indicators remain benign but we remain cautious on the outlook, and stand ready to support customers further if needed. Against this backdrop, impairment charges were muted as provisions taken for COVID-19 impacts were unwound. Despite a modest reduction, we have retained above pre-COVID levels of coverage with a potentially challenging economic outlook in mind, and to reflect worsening macroeconomic forecasts.”

In the statement, Virgin Money said its investment was continuing to focus on delivering a scalable, more efficient digital growth platform.

Virgin Money said this approach was delivering new functionality for customers at greater speed.

The statement added: “As we continue to embed A Life More Virgin ways of working, we have continued to rationalise our property footprint, reducing it by 50 per cent to c450k sq ft to align with the simpler needs of a digital bank.”

In September last year, Virgin Money announced plans to close 31 branches.

A spokesman said there were no plans to further reduce the branch network, adding: “We are led by changing customer behaviour and will continue to review transaction levels, commercial performance, lease details and general customer usage.”

Mr Duffy added: “The macroeconomic outlook has become more uncertain over the course of the year. Following a positive recovery in expectations post-COVID, recent events have seen forecasts deteriorate. As we enter a more volatile environment, with higher inflation and rates, we are carefully monitoring for any impacts. We enter this phase with a prudently underwritten loan book, robust coverage, and a defensive asset mix. We are ready and able to continue supporting the customers, colleagues and communities we serve.”