CYBG PLC may have changed its name to Virgin Money PLC (LON:VMUK) but one acronym remained much in use in its full-year results: PPI.
The company said it saw an unprecedented surge in payment protection insurance (PPI) requests in August, before the deadline for compensation claims closed, resulting in the bank setting aside a further £385mln in the fourth quarter of the financial year to cover potential pay-outs related to mis-selling of PPI.
What the bank euphemistically called “legacy conduct” provisions for the year to the end of September totalled £433mln, up from £396mln the year before, ensuring the company remained in the red with a pre-tax loss of £232mln versus a loss the year before of £164mln.
As a result of the sharp increase in PPI provisions, the board has binned the dividend for now. The lender revealed that around 9% of the enquiries it received about possible mis-selling of PPI resulted in the complaints proving justified.
Underlying pro forma (i.e. reflecting the integration of Virgin Money into the group) profit before tax slipped to £539mln from £581mln the year before.
Total underlying operating income fell 3% to £1.64bn from £1.69bn the previous year, reflecting competitive market conditions that hit net interest income, a lower contribution from the bank's investments business, and downgrades to the fair value of assets.
The net interest margin – a ratio of how successful a bank is at investing its funds - receded to 1.66% from 1.78% the previous year.
Despite many of the key performance indicators moving widdershins (i.e. in the wrong direction), David Duffy, the chief executive officer, claimed the newly combined business had “delivered a good operating performance in challenging conditions”.
“Our customer divisions have performed well - we have delivered a further c.£2bn in net lending to support UK SMEs and consumers, attracted c.£3bn in customer deposits, and made marked improvements to our customer experience,” Duffy trumpeted.
“We achieved all the required approvals in 2019 to enable us to operate as one bank, with one brand, and are ready to deliver our strategy to disrupt the status quo with brilliant customer service and unique Virgin Money products,” he added.
We’ve announced our full year results this morning for the 12 months to 30 September. It has been an exciting year for Virgin Money UK, with significant progress on our rebrand and with our strategy to disrupt the status quo #VMUKresultshttps://t.co/OlB3mV5kHj pic.twitter.com/6uG3Ft2HVc— Virgin Money UK PLC (@VMUKPLCNews) November 28, 2019
Shares in Virgin Money were up 9.6% at 156.65p in early deals.