Virgin Money soars as it clears PPI, suspends divi

David Duffy

UPDATE 2 — Shares of Virgin Money UK, formerly called CYBG, soared about 20% on Thursday after the bank said it believed the worst of the PPI insurance scandal was behind it and it suspended its dividend.

The owner of Yorkshire and Clydesdale banks said it had set aside £385 million in the last quarter to cover costs related the mis-selling of payment protection insurance (PPI).

Virgin Money UK chief financial officer Ian Smith told journalists: “We are going to be processing claims from now through to the end of next summer, but we think we have got a pretty good handle on the costs.

“I can’t say that there’s not going to be any more provisions, but I am very confident the risk of a scale charge in relation to PPI is completely behind us.”

Announcing results for the year to September 30, 2019 — its first full results as a merged entity — Virgin Money UK said underlying pretax profit dropped 7% to £539 million, below analysts’ average forecast of £544 million.

The bank said its statutory loss after tax of £194 million “reflects legacy conduct costs and restructuring & acquisition costs.”

Customer lending growth was 2.9% to £73 billion, with mortgage lending growth up 1.7% to £60.1 billion.

Deposit growth was 4.6% to £63.8 billion.

Virgin Money UK CEO David Duffy said: “In the first year of our newly combined business, we have delivered a good operating performance in challenging conditions and made great progress on the integration and rebrand to Virgin Money.

“Our statutory result was significantly affected by additional PPI provisions, driven by the unprecedented surge in PPI information requests in August, along with anticipated Virgin Money acquisition-related costs. 

“Our customer divisions have performed well – we have delivered a further c.£2bn in net lending to support UK SMEs and consumers, attracted c.£3bn in customer deposits, and made marked improvements to our customer experience.

“We achieved all the required approvals in 2019 to enable us to operate as one bank, with one brand, and are ready to deliver our strategy to disrupt the status quo with brilliant customer service and unique Virgin Money products. 

“In December we are launching Virgin Money’s first digital personal current account and three new Virgin Money concept stores. 

“A unique loyalty and rewards programme for customers featuring a number of Virgin Group companies will follow in 2020, along with the launch of our brand new Virgin Money business account.”