Virgin Money shares up 18 per cent after annual loss smaller than feared
PPI costs incurred following CYBG acquisition
Shares in Virgin Money were up 18.81 per cent by late-afternoon trading at 169.90 pence, after the financial services provider reported smaller than expected annual losses.
The company reported a pre-tax loss of £232m ($299m, €272m) in the year to September 30, worse than last year’s loss of £164m ($211m, €192m).
The rise in losses has been attributed to the need to compensate those who were mis-sold payment protection insurance (PPI). As the time-limit for receiving compensation for the scandal loomed, Virgin Money made provisions for the potential reimbursement of up to £385m ($498m, €451m).
Although under founder Jayne-Anne Gadhia the company was well capitalised and never sold PPO, its new partner Clydesdale Bank did, Virgin has consequently had to shoulder the cost. Following a £1.7bn ($2.1bn, €1.99bn) takeover in October 2018, Virgin Money has been part of CYBG – this holding company owns Clydesdale Bank, Yorkshire Bank, Virgin Money UK and the app-based bank B.
Due to what the company described as an “unprecedented industry-wide surge” in last-minute PPI claims before the August 31 deadline, Virgin has scrapped its final shareholder dividend payment.
Virgin Money will hope to improve its current trajectory, indeed if today’s share price surge is anything to go by, reporting losses of £194m and compensating customers £385m for mis-sold financial products is no longer fatal for a bank’s image and ability to attract investors.
Reacting to the report CYBG chief executive David Duffy stated: "We have moved swiftly to address the issue and are leveraging innovative technology solutions to enable us to deal with genuine customer complaints as quickly, and as cost effectively, as we can.” He admitted: “It is nonetheless frustrating to incur a further £385m in provisions... as we look to close out this legacy issue.”
FURTHER READING: Shop Direct faces collapse after surge in PPI claims
FURTHER READING: UK banks suffer PPI losses