Yahoo Finance Virgin Money tucks away more cash for toxic loans
Virgin Money has put aside another £42m to cover for potentially toxic loans amid fears of a spike in unemployment and the impact that could have on mortgage loans.
The top-up, which includes a 62pc rise in provisions for defaults on mortgages due to "more cautious assumptions in relation to the outlook for unemployment" and house prices, takes Virgin's total pot for credit loss provisions to £584m.
The UK's sixth-largest lender said it had "not yet seen any significant credit losses" nor been required to make any significant specific provisions due to the pandemic, although chief executive David Duffy said he "knows things may yet get more difficult for many".
The bank said it had seen an increase in consumer spending and economic activity in recent weeks, but warned that the economic outlook remains highly uncertain and it may be "some months before the full extent of the impact of the lockdown on customers is visible, once government and other support measures are withdrawn".
As a result the company is now "preparing assiduously to manage higher levels of customers in financial difficulty".
Many people have saved money during lockdown, with the bank saying it now has £67.7bn in customer accounts, 4.8pc more cash than a year ago, as people stopped spending on restaurants, bars and commuting earlier in the pandemic. In comparison the value of its mortgage portfolio dropped 1pc to £58.9bn.
The lender, which was reporting results for its third quarter, was formed in a £1.7bn tie-up with Clydesdale and Yorkshire Banking Group in 2018, and pays Sir Richard Branson £11m a year to use the Virgin name. It did not provide an update on its profit or revenue.
The amount it has put aside for toxic loans is a fraction of the figures earmarked by the bigger rivals it is trying to compete with, which have already put aside billions of pounds and will begin reporting their second-quarter results tomorrow.
John Cronin, an analyst at Goodbody, estimates that Barclays, Lloyds and NatWest Group will collectively take another £4bn hit from coronavirus over the second quarter, while HSBC and Standard Chartered could each put aside another £1bn to £2bn.
