Virgin Money hails strong performance, despite falling lending

Virgin Money hailed strong performance in the first quarter of its financial year and believes the UK economy is recovering from the pandemic.

The rebranded Clydesdale Bank, with offices in Glasgow, issued a trading update in which it said there was “some scope for optimism about the pace of recovery”.

The bank said its deposit mix was improving, with overall deposits reducing by 2% to £65.5bn, but “relational deposits” increasing slightly to £31bn.

It has seen 140,000 new accounts opened since its Brighter Money Bundles campaign began last year, but 28 Virgin Money branches closed during the period, including former Yorkshire Bank and Clydesdale locations.

Mortgage and business lending fell over the period as mortgage lending was impacted by the end of stamp duty relief and stiff market competition.

Business lending fell as demand remained “subdued” and the UK government’s Covid-19 support programs began to taper, although they expected an increase later in the year.

Unsecured lending rose 3%, with a significant increase in people’s spending on credit cards, and Virgin Money raised the outlook for its net interest margin – a key measure of retail bank profitability.

Chief Executive David Duffy said: “Virgin Money’s performance in the first quarter was strong – our balance sheet is in good shape, asset quality remains strong and we have increased our net interest margin guidance for 2022.

“We are optimistic about the pace of recovery in the UK economy based on growing consumer and business confidence, supported by falling unemployment.

“We continued our strong offering of new digital propositions, including the launch of our no-fee digital business checking account and innovative new unsecured lending products, with more to come later this year.”

The business update also highlighted how the bank was moving towards a more flexible working model, which led to the announcement in December of partial closures and other changes to its offices in Glasgow, Newcastle and Leeds.

The bank added that it expects restructuring charges of £275million over the next three years, with around half down this year.

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