Virgin Money delays Yorkshire Bank rebranding and bank closures

Virgin Money has given payment holidays to around 60,000 mortgage borrowersVirgin Money has given payment holidays to around 60,000 mortgage borrowers
Virgin Money has given payment holidays to around 60,000 mortgage borrowers | other
Virgin Money has paused the rebranding of its Yorkshire Bank branches amid the Covid-19 outbreak, which has had a heavy impact on profits.

Virgin Money said half year underlying profits have more than halved after the bank took a £232m hit as it braces for soaring loan losses from the coronavirus pandemic.

The Clydesdale and Yorkshire Bank owner posted underlying pre-tax profits of £120m for the six months to March 31, down 58 per cent on the £286m reported a year earlier.

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Virgin Money currently has 84 Yorkshire Bank branches and none have been converted yet.

Given the environment, it has decided to delay the Virgin Money re-launch and re-branding campaigns, as well as the other customer launches it had planned for the second half of 2020. It now expects these to move into the 2021 calendar year with rebranding expected to start from October onwards.

On a statutory basis, the group swung to a £7m interim loss from profits of £42m a year ago.

Total charges included an extra £164m set aside for Covid-19 related impairments amid expectations of rising bad debts as customers default on loans.

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The group said around 1.2 per cent of its credit card customers, amounting to 12,000 customers, are seriously in arrears by three months or more.

The bank has given payment holidays to around 60,000 mortgage borrowers, 32,000 credit card customers and 8,000 personal loan customers.

It has received around 5,640 applications for the Chancellor's new bounce-back loans scheme for struggling small firms since it was launched just two days ago.

It expects to work through the initial wave of applications and pay out loans by the end of the week.

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Virgin Money chief executive David Duffy said: "The Covid-19 outbreak and its impact on the nation's businesses and consumers has markedly changed the operating environment, driving an increased impairment charge of £232m against future loan losses and a reduction in underlying profitability.

"Amid the uncertainty, it is clear that the pandemic will have long-lasting and wide-ranging effects on how companies do business and on what customers will expect from the organisations they choose to interact with."

At the end of March, the bank shelved plans to axe around 500 jobs and shut or merge more than 50 branches across the UK due to the coronavirus crisis.

It said it is postponing the changes first announced in February to bring together the Yorkshire Bank and Clydesdale brands with Virgin Money.

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It has not indicated when the redundancy plans will be revisited, saying it isfocusing all of its efforts on tackling the coronavirus crisis.

It had been due to close 22 branches and consolidate another 30 while also rebranding the entire network as Virgin Money by October 2020.

Analyst Gary Greenwood at Shore Capital has issued a 'buy' recommendation for Virgin Money's shares following the update.

He said: "While profitability is clearly under pressure due to Covid-19 and is also being held back at a statutory level due to merger-related costs (integration and fair value movements), we do not view these factors as being permanent and expect profitability to recover sharply in due course.

"Furthermore, with significant capital headroom to the regulatory minimum, we see an emergency equity raise as very unlikely."

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