Virgin Money has seen pre-tax profits fall amid ongoing restructuring and write-downs of assets.
The Newcastle-based bank, which also has major offices in Glasgow and Leeds, is shutting down 39 branches across the country at a cost of £73m, having pointed to changing customer demand and increased uptake of digital services. In new results for 2023, Virgin said its underlying pre-tax profit was £593m, down from £776m last year, citing much higher exposures to bad credit compared to last year and higher adjusting items associated with £213m costs incurred of an expected £275m restructuring programme.
At the same time bosses have laid out a £130m investment programme focussing on financial crime prevention and cyber defence capabilities. The money will be spent over the next three years, starting with £40m next year and including work to deliver data and analytical capabilities that will feed its risk reporting.
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Virgin reported overall lending balances as stable at £72.8bn with 9% growth across its unsecured business-as-usual lending. But its mortgage book - now worth £57.5bn - reduced 1% against the backdrop of higher rates and the impact of cost of living pressures. The bank said it had traded to preserve profitability amidst the subdued market as competition was "intense". Meanwhile net interest income grew 8% to £1.71bn.
A higher credit impairment charge - equivalent to a cost of risk of 42 basis points (bps), up from 7bps - included what Virgin said was a more conservative economic outlook. It said the numbers reflected an increased expected credit loss provision and coverage of 84 bps, up from 62bps in 2022. The main driver was said to be higher modelled future losses for credit cards.
The bank simultaneously announced a £150m share buyback scheme across is London-listed and Australian Securities Exchange.
David Duffy, chief executive officer at Virgin Money, said: "We made good progress executing our strategy in 2023, growing both our relationship customer base and target lending segments. With the momentum we carry into 2024, we are confident in the outlook for our business and we expect to deliver around £800m in distributions to our investors by the end of the three-year period ending in 2024.
"Under the Virgin brand, our ambition is to create the UK's best digital bank. To help achieve this goal, we are stepping up investment in our technological capability to future proof our business and protect our customers from the growing risk of fraud strategies driven by advances in AI."
