Virgin Money allocates £42m for bad loans
Virgin Money, owner of Glasgow-based Clydesdale Bank, has allocated an extra £42 million to cover potential losses from an increase in bad loans as the bank braces for the economic fallout from the coronavirus crisis.
The allocation of funds, revealed in the lender’s third-quarter results, are focused on mortgages and personal loans and were taken after Virgin Money made “more cautious assumptions” about the outlook for unemployment and house prices in the UK.
They take the overall balance sheet credit provisions to £584 million and come after Virgin Money previously allocated £232 million to cover expected loan losses at its half-year results released in May, which pushed the bank to a £7 million pre-tax loss.
The trading update released by the bank yesterday also indicated that personal lending at the bank dropped by 2.7% to £5.2bn, which Virgin Money said was primarily due to lower credit card balances.
Virgin money also offered payment holidays and overdraft extensions to almost 150,000 people and businesses, while it awarded £867m to UK firms through the UK Government’s CBILS loan scheme.
The lender is the first of the UK banks to report figures for the lockdown period, with results from other banks due to be published in the next few days.
The City of London expects the big lenders to report billions of pounds of loan-book impairment charges because of the coronavirus, once government support schemes come to an end, The Times reports.
Virgin Money said that it “has not yet seen any significant specific provisions or credit losses in relation to the pandemic, given a backdrop of government support” and forbearance measures it had taken.
David Duffy, the bank’s chief executive, said: “You absolutely just can’t relax about what you’re seeing today, nor are we naively just wondering what’ll happen”.
He added that between November and March there would be “a settling in of some impact of jobs being lost and then throughout 2021 you’ll see the lag effect of that”.
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