CLYDESDALE Bank owner Virgin Money has highlighted its confidence in the prospects for a strong recovery from the economic slump triggered by the pandemic as it said it had made progress in key markets.
The Glasgow-based group said it had released £19 million in respect of provisions made previously for potential impairments citing the strengthening economic backdrop.
“The rollout of the vaccination programme and the easing of restrictions supported further positive revisions to expectations,” said Virgin Money.
“ Stronger GDP growth, lower unemployment, a robust housing market and greater consumer confidence are all positive indicators of the improving outlook for the operating environment. Overall, while risks remain from the increase in COVID case numbers driven by the new variants and the impact of the removal of Government support schemes later in the year, the strengthening backdrop gives scope for greater optimism about the pace of the recovery.”
The group said it remains focused on any potential implications for customers as Government support is fully removed.
However, it added: “If the current strengthening in the economic backdrop persists, the Group believes there may be an opportunity for a further reduction in credit provision levels alongside FY21 results.”
The group seems markedly more upbeat than it was at the time of its annual results announcement un May.
Chief financial officer Clifford Abrahams said then that it had maintained provisions levels because it felt there was still some uncertainty over how the economy would respond when Government subsidies were withdrawn. The furlough programme will end in September.
In an update on trading Virgin Money said it had performed in line with expectations and made strategic progress in the quarter ended June 30.
The group has focused on the Virgin Money brand after it decided this was stronger than the Clydesdale name or that of Yorkshire Bank, which it also owns.
It signed up around 30,000 new personal current account customers in the quarter, after adding 80,000 in the six months to March 31.
The group said its new business current account has been well received. It expects to recruit customers from Royal Bank of Scotland after being awarded more support under the switching scheme introduced to meet conditions imposed by EU regulators following the £45bn bailout of RBS amid the financial crisis.
Around 16,000 firms have moved to operations now owned by Virgin Money group under the scheme, which was launched in 2019.
Some 69,000 firms had switched in total to the 10 qualifying banking groups by June 30, well short of the 120,000 target.
Virgin Money said the balance of personal lending balances outstanding grew 2.5 per cent, to £5.2bn ,in the latest quarter driven by growth in credit cards as activity picked up. Sectors hit hardest by the pandemic, such as travel, remain subdued.
The group noted: “Mortgages increased 0.7% to £58.7bn, benefitting from strong activity around SDLT (stamp duty land tax) deadlines.”
Business lending fell 2.4% to £8.7bn. The group said business as usual activity remained subdued. Lending under Government-backed loans schemes reduced as anticipated.
Virgin Money expects to harness the benefits of digital to help it win business while keeping costs down. In July last year it reactivated plans to close seven Scottish branches that it had paused because of the coronavirus.
Asked yesterday about the group’s plans, a spokesperson did not rule out further branch closures.
“ Customer demand continues to move towards digital channels and we need to ensure we have the proposition to meet that,” said the spokesperson.
“ Stores remain an important part of what we do and … we expect to have stores for as long as our customers need them.”
Virgin Money has 55 branches in Scotland. It employs around 5,000 people in the country including 3,000 in Glasgow.
Shares in Virgin Money closed up 3.85p at 196.7p.
It has cut 200 jobs in Glasgow since October last year.
The job cuts were made under a rationalisation and integration process launched following the £1.7 billion takeover of Virgin Money by the former Clydesdale and Yorkshire Bank Group (CYBG) in 2018.
The group subsequently adopted the Virgin Money name.