Yorkshire Bank owner announces half a billion pound charge for pandemic loan losses
The firm reported underlying annual pre-tax profits of £124m for the year to September 30, down sharply from £539m the previous year.
The group said its “substantial” charge for bad debts comes as it prepares for a surge of borrowers falling behind with repayments due to the fallout from the coronavirus crisis.
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Hide AdIt said it has not yet seen significant arrears, but took the charge to reflect the “highly uncertain” economic outlook and the fact restrictions are set to remain in place for some time.
On a statutory basis, the group saw pre-tax losses narrow to £168m, from losses of £265m the previous year.
Virgin Money paused the rebranding of its Yorkshire Bank branches at the start of the Covid-19 outbreak, but it has resumed the process and now 26 out of 67 Yorkshire Bank branches have been rebranded as Virgin Money. The rebrand should be completed in spring 2021.
David Duffy, Virgin Money's chief executive, said: “It has been an extraordinary year of disruption for all of us. Our priority has been to support our customers and colleagues through this period, and we will continue to do so during the challenging economic environment ahead. I’m proud of the way we’ve adapted how we work this year to continue serving our customers, while looking after our colleagues and protecting the bank for the future.
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Hide Ad“While we are yet to see any material impacts of the pandemic on the credit quality of our loan book, our results reflect a cautious and conservative approach to the coming period as we refine our assessment of the uncertain economic outlook and the impact of the second lockdown.
"Although the vaccine news is a strong cause of hope for the future, the economic benefits are still some way off when considering the immediate reality of current restrictions and so have not yet been factored into our near-term forecasts.“
Virgin Money said it had not factored in any potential boost to the economic outlook from the vaccine, as Mr Duffy said it was “uncertain when or how big that benefit would be”.
Its results showed mortgage lending dropped 3 per cent to £58.3bn over the year as the spring lockdown hit demand.
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Hide AdThe property market boom since restrictions were lifted over the summer and the stamp duty holiday will provide a lending boost in the first half of its new financial year.
However, it said it was more cautious over the outlook for the housing and mortgage market once the stamp duty holiday ends in March and as the furlough support scheme comes to an end.
The group said it has no plans for any more branch closures or job losses.
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