Management highlighted a defensive loan book, with 82% in high-quality mortgages and 11% in business lending with no material exposures to the more immediately impacted sectors
() reported a sharp fall in underlying half-year profit after taking £232mln of charges related to the coronavirus crisis.
The challenger bank took an increased impairment charge against future loan losses and a reduction in underlying profitability, with a balance sheet impairment provision of £164mln made up of £110mln for business, £39mln for personal and £15mln for mortgages
Among the bank’s numerous measures of profit, pre-provision operating profits of £352mln for the six months to end-March were down 3%, underlying profit on ordinary activities before tax of £120mln were down 58% but statutory profit after tax of £22mln was up 144% versus a very soft comparable period.
Pre-provision profits were hit by expected compression of net interest margin, the difference between interest on loans and deposits, which was 1.63% in the second quarter, up from 1.60% in the first.
VMUK said loans grew of 0.3% to £73.2bn and deposits by 1.4% to £64.7bn.
Management highlighted that the defensiveness of the loan book, with 82% in high-quality mortgages, 11% in business lending with no material exposures to the more immediately impacted sectors and 7% in personal lending, primarily in credit cards.
Capital levels were good, with a CET1 ratio of 13.0%, with a liquidity coverage ratio of 139% and no wholesale funding requirement for 9-12 months and no short-term wholesale funding reliance.
“While we delivered a resilient performance and continued to make good progress on our self-help strategy in the first half of the year, our primary objective now is safeguarding the health and well-being of our colleagues, customers and communities while also protecting the bank,” said chief executive David Duffy.
He added: “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.
“Although the full impacts from the COVID-19 outbreak will take time to emerge, I’m confident that our agility, digital capabilities and focus on disrupting the status quo will make us stronger and well-equipped to support changing customer needs and play our part in the UK’s economic recovery.”
The shares were up 6% on Wednesday morning to 75.62p.
Duffy separately moved to quash suggestions that the company may back off plans to rebrand Clydesdale and Yorkshire branches in the wake of negative publicity around the Virgin name following Richard Branson’s requests for a government bailout of Virgin Atlantic.
The rebranding is delayed, but, according to Dufy it is because of COVID-19 and job cuts rather than PR.
“Effectively we are continuing with the implementation of the our rebranding. We think it’s a great…
Read More: Virgin Money UK PLC takes £232mln impairment charge for future coronavirus