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02 Feb 2021 | 07:34

Virgin Money sets aside further ?726m for bad loans

(Sharecast News) - Virgin Money said it has aside another £726m in bad loan provisions in the first quarter to deal with the impact of the coronavirus pandemic.

The lender on Tuesday said it had granted mortgage payment holidays on £12.1bn of loans at December 31, equivalent to around 21% of balances, compared with £11.9bn at its fiscal full-year.

Virgin's loan look fell 0.3% to £72.2bn in the three months to December 31 as new Covid-19 restrictions dampened demand.

Net interest margin (NIM), the difference between lending and savings rates, was unchanged at 152 basis points (bps), with higher liquidity and lower hedge contributions offset by an improving mix and cost of deposits, and supportive mortgage spreads, the company said.

The bank continued to expect a "broadly stable" 2021 NIM, based on the current economic outlook and interest rate expectations with the balance of risks and opportunities currently weighted to the upside.

The CET1 ratio, a measure of financial strength, increased 50bps to 13.9%, partly offset by a £49m charge for the Payment Protection Insurance scandal.

"Given the current UK-wide restrictions and ongoing uncertainty, we maintain the cautious economic outlook we outlined in November and our full year guidance remains broadly unchanged," said chief executive David Duffy.

"Looking ahead, the vaccine roll-out and EU trade deal are encouraging for the UK's economic recovery and we remain focused on disrupting the market through a variety of innovative new products and propositions with a customer and brand experience that is the best in the market."
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