Virgin Money increases PPI provisions by £49m

Virgin Money has added a further charge of £49 million to the cost of compensation over the PPI scandal following a higher level of internal reviews into complaints leading to payouts.

The bank added it finished the final processing of all complaints by January 25, with a total of 740,000 received and a processing cost of £3.1 billion.

It comes as the high street lender revealed cautious customers were avoiding taking out personal loans and instead turning to depositing their cash.

In the three months to the end of 2020, customer deposits rose 0.9% to £68.1 billion as customers spent less and businesses maintained healthy balance sheets to get through the pandemic.

Mortgages reduced 0.2% to £58.2 billion and personal lending fell 2% to £5.1 billion compared to the previous quarter.

Business lending rose slightly by 0.1% to £8.9 billion, although the Government-backed lending schemes remained popular as the second national lockdown in England saw businesses take on more debt to see through the winter.

Bounceback loans increased by 14% and bigger Coronavirus Business Interruption Loan Scheme (CBILS) and Coronavirus Large Business Interruption Loan Scheme (CLBILS) facilities rose 19%, the bank added.

David Duffy, the bank’s chief executive, said the quarter was positive, including returning to a statutory profit in the period.

He added: “Given the current UK-wide restrictions and ongoing uncertainty, we maintain the cautious economic outlook we outlined in November and our full year guidance remains broadly unchanged.

“Looking ahead, the vaccine rollout and EU trade deal are encouraging for the UK’s economic recovery and we remain focused on disrupting the market through a variety of innovative new products and propositions with a customer and brand experience that is the best in the market.”

The bank said it had seen higher customer spending prior to stricter Covid-19 restrictions introduced in November and December, but this fell back as tiering and lockdowns were introduced.

Virgin Money added it is continuing to support customers with payment holidays, although it revealed the number of active holidays has fallen.

It added: “The proportion of customers requiring further support upon exiting their payment holiday has increased modestly, as anticipated, and remains within the level assumed in our provision.”

A total of £12.1 billion in mortgage payment holidays had been granted – or 21% of balances, with £600 million currently active. Around 98% of previous payment holidays have now been repaid, it added.

Around £265 million of credit card payment holidays were granted – or 6% of balances, with £35 million currently active. Around 88% of previous credit card payment holidays have been returned.

Personal loans of £119 million had holidays – or 14% of balances, with £8 million still active. Around 92% of previous holidays have been repaid.

Looking forward, the bank said: “The economic outlook remains highly uncertain and given the extension of Government support measures it will be further into (2021) before greater clarity emerges.

“The recent UK-EU trade agreement and accelerating delivery of the UK’s Covid-19 vaccination programme are both supportive to the longer-term economic recovery.

“However, recent further restrictions across the UK as a result of record infection levels are likely to delay the pace of normalised economic and transaction activity.

“As a consequence, Virgin Money UK continues to adopt a cautious view on economic assumptions and this is reflected in coverage levels, underwriting standards and liquidity levels.”