Virgin Money, the Glasgow-headquartered banking group, revealed a near-inflation pay rise for the majority of its 7,500 staff as it posted a 43% rise in annual profits.
The group said it was giving most workers a raise of around 10 per cent on average to help with the soaring cost of living, on top of a £1,000 payout in August . The pay rise, which was announced internally earlier this month, will be in two installments, the first in January and the second in July, with staff being paid between 9 and 11% extra.
The group, formerly known as CYBG, owner of the historic names of Clydesdale and Yorkshire banks, has also launched a cost of living center to help offer support to customers in financial difficulty, but said it would not hadn’t yet seen signs of an increase in borrowers late in their repayments. But the lender stressed it was “watching its customer base carefully” and had earmarked £52m to cover borrower defaults as the UK faces a prolonged recession due to the cost of living crisis . That compares with a release of £131m the previous year from loan loss write-downs built up during the pandemic.
Virgin Money’s annual results showed statutory profit before tax jumped to £595m for the year to September 30, from £417m the year before, partly thanks to higher interest rates. interest that boosted profit margins. On an underlying basis and excluding costs such as restructuring charges, full-year profits fell 1% to £789m.
Victoria Scholar, chief investment officer at Interactive Investor Financial Group, said: “Virgin Money shares fell sharply in May despite rising half-year profits. However, today’s story is very different with the lender returning money to shareholders while the CEO said the company was offering proactive help and support to customers in this environment.
“Other lenders this earnings season, including National construction company last week warned of the risk of increased defaults and rising bad debts, pointing to the growing risk of recession and broader macroeconomic pressures on inflation that are squeezing household budgets.
Virgin Money chief executive David Duffy told investors: “The macroeconomic outlook has become more uncertain over the year. After a positive recovery in post-Covid expectations, recent events have seen forecasts deteriorate. As we enter a more volatile environment, with higher inflation and tariffs, we are carefully monitoring any impact. »
The group said it saw the impact of soaring inflation on bank customers, with its data showing spending soared 16% on groceries and 57% on energy bills. It reported overall loan growth of 0.8% for the year to £72.6bn, while improving its net interest margin outlook – a key measure of retail banking performance – for the coming year due to rising UK interest rates. The group said mortgages were flat at £58.2bn, having returned to growth in the second half of the financial year.