By Aisling Finn on Wednesday 25 November 2020
Despite lending out over £1.2bn in government-backed loans, a series of bad loans have put Virgin Money on the back foot.
Virgin Money has had to write off just over half a billion in bad loans and as a result, has put aside £735m to cover its bad loans for the next year, its full-year results for 2020.
This resulted in the Group recording a total impairment charge of £501m inclusive of write-offs.
As a result of Virgin Money’s bad loans, its profit before tax shrunk by over three quarters (77 per cent) to just £124m in 2020 compared to £539m in 2019.
Virgin Money also revealed that nearly a quarter (23 per cent) of its eligible customers took advantage of its mortgage payment holidays, with the vast majority (98 per cent) now having resumed a regular repayment schedule.
David Duffy, CEO of Virgin Money, said: “It has been an extraordinary year of disruption for all of us. While we are yet to see any material impacts of the pandemic on the credit quality of our loan book, our results reflect a cautious and conservative approach to the coming period as we refine our assessment of the uncertain economic outlook and the impact of the second lockdown.”
“Although the vaccine news is a strong cause of hope for the future, the economic benefits are still some way off when considering the immediate reality of current restrictions and so have not yet been factored into our near-term forecasts.”
Despite the challenges in its loan books, deposits in Virgin Money accounts grew by 5.8 per cent from just under £63.8bn last year up to just over £67.5bn in 2020.
As well as growing its deposits, the British bank also increased its business lending by 13.6 per cent to £8.9bn in 2020.
An increase that the bank says is “solely due to the government-guaranteed lending schemes.”
In total, the lender dished out £1.2bn in government-backed loans, which consisted of £809m to over 28,000 businesses through the Bounce Back Loan scheme (BBLS) and £334m to 907 firms through the Coronavirus Business Interruption Loan Scheme (CBILS).
Virgin Money also gave out three loans under the Coronavirus Large Business Interruption Scheme, totalling £20m.