Virgin Money has posted a 77% plunge in full-year underlying profits after booking a £501 million hit as it braces for economic fallout from the second coronavirus lockdown.
The Clydesdale and Yorkshire Bank owner reported underlying annual pre-tax profits of £124 million for the year to September 30, down sharply from £539 million the previous year.
The group – formerly known as CYBG – said its “substantial” charge for loan losses comes as it prepares for a surge of borrowers falling behind with repayments due to the coronavirus crisis.
It 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 £168 million, from losses of £265 million the previous year.
David Duffy, chief executive of Virgin Money, said: “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.”