Virgin Money sees jump in new business borrowing

● Surge in firms tapping into virus support schemes ● Personal lending falls 2.7% to £5.2bn in third quarter

Clydesdale Bank owner Virgin Money has provided a £269 million coronavirus lifeline to small and medium-sized enterprises (SMES) in Scotland, making up about a third of its lending under UK government support schemes.

In a third-quarter trading update, the Glasgow-headquartered group also said that there was now £67.7 billion in customer accounts, mainly due to lower spending, but also businesses ensuring that they have enough cash to keep going. The figure marks a 4.8 per cent rise for the period.

Businesses borrowed more – up by 5.7 per cent to £8.8bn – as they tapped into various support schemes. Virgin Money has lent £619m in Bounce Back Loans and £248m in Coronavirus Business Interruption Loans, with the Scottish figure – covering 6,800 SMES – accounting for about a third of that total.

Personal lending was down, by 2.7 per cent to £5.2bn as people shopped less on their credit cards. Virgin, formerly known as CYBG, said that more than half of the 67,000 mortgage customers who had taken a payment holiday during the pandemic are now making repayments again.

Chief executive David Duffy said: “We know that things may yet get more difficult for many of our customers, but we are determined to continue to support their needs where we can and to fulfil our role in the economic recovery.

“Our third-quarter financial results reflect lower demand from consumers due to the pandemic, but strong demand from businesses for government-supported schemes, with the group further increasing its provisions to reflect the uncertain economic outlook while maintaining a focus on margin, cost and capital management.”

The bank said recently that it was resuming plans to shut or merge more than 50 branches and axe 300 jobs after pausing the overhaul amid the coronavirus crisis.

It said the immediate job cuts were 200 fewer than those previously announced due to changes made in response to Covid-19. It will also offer staff affected by branch closures the option to remain with the group until 20 October to help offer support to vulnerable customers.

The lender will restart its shake-up next month, shutting 22 branches and merging 30 more into nearby sites within a half-mile radius, as well as rebranding all Clydesdale Bank and Yorkshire Bank branches under the Virgin Money banner.

Fahed Kunwar, banks analyst at research group Redburn, noted: “Virgin Money’s results highlight the state of limbo the banks are currently in.

“We will wait for the fourth quarter when the furlough schemes end to see just how serious the loan losses are, particularly on Virgin Money’s credit card portfolio.”