High street lender Virgin Money has returned to profit in the first half of the year but said it remains cautious on how the economy will fare when furlough and other Government support schemes are withdrawn.
The group – which has bases in Newcastle, Leeds and Glasgow – reported pre-tax profits of £72m for the six months to March 31 against losses of £7m a year earlier.
On an underlying basis, interim pre-tax profits more than doubled to £245m from £120m a year ago.
Profits were boosted as impairments for bad debts fell 84% to £38m compared with a year earlier, offsetting lower retail banking income due to rock-bottom interest rates.
The bank also reported a further £59m hit from the payment protection insurance (PPI) scandal after a higher level of internal reviews into complaints led to payouts.
Chief executive David Duffy said: “Virgin Money had a strong first half. We doubled underlying profit compared to last year and returned to statutory profit.
“The quality of our loan book remained resilient in the period, and we’ve continued to support customers and look after our colleagues and communities, while safeguarding the bank.
We’ve made significant strategic progress to transform Virgin Money into a leading digital bank and our rebranding is largely complete. We’ve launched a range of innovative and compelling Virgin Money personal and business products as well as differentiated loyalty offers, which are showing early signs of success.
“Our ESG strategy continues to gain momentum across the business including developing sustainability-linked business loans and a green mortgage product as we look to further embed sustainability across everything we do. This lays the foundation for efficient, sustainable growth of deep, long-lasting customer relationships.
“We are cautiously optimistic about the improving outlook as the impact of the vaccination programme in the UK delivers positive revisions to economic expectations.
“We’re continuing to manage through what is still an uncertain economic backdrop, but the bank is well placed, with a strong balance sheet, and through ongoing strategic delivery we have a clear path to long-term, improved sustainable returns.”
Virgin Money was formed from the 2018 merger of CYBG, the owner of the Clydesdale and Yorkshire banks, with Newcastle’s Virgin Money, which itself had taken over most of the assets of the former Northern Rock bank. It is now the country’s sixth largest bank.
Despite increasing confidence on the UK’s economic outlook, the bank said that it recognised “the need for additional customer support as furlough ceases, Government-backed loan schemes are phased out, repayments commence and the economy normalises.”