Virgin Money UK reports annual profit miss, cancels dividend

Credit: REUTERS/PHIL NOBLE

Virgin Money UK Plc reported a lower-than-expected full-year underlying profit on Thursday and suspended its dividend, as the lender set aside more money to settle a payment protection insurance mis-selling scandal in Britain.

Adds background on PPI scandal, CEO comment

Nov 28 (Reuters) - Virgin Money UK Plc VMUK.L reported a lower-than-expected full-year underlying profit on Thursday and suspended its dividend, as the lender set aside more money to settle a payment protection insurance mis-selling scandal in Britain.

The owner of Clydesdale and Yorkshire Bank said underlying pretax profit dropped 7% to 539 million pounds ($691.54 million) for the 12 months ended Sept. 30, below the 544 million pounds analysts, according to a company-supplied consensus.

The company, formerly known as CYBG, emerged as UK's sixth-biggest lender after it bought Richard Branson-owned Virgin Money last year, and has since bet on re-branding and growth in business banking to challenge bigger rivals Lloyds LLOY.L, RBS RBS.L and Barclays BARC.L.

However, in its first full results as the merged entity, the bank said it took 385 million pounds more in provisions to settle claims relating to the mis-selling of payment protection insurance (PPI) in the last quarter.

The PPI saga has already cost UK lenders billions, but a surge in last minute claims ahead of an August deadline has ratcheted up costs further.

"Our statutory result was significantly affected by additional PPI provisions, driven by the unprecedented surge in PPI information requests in August," Chief Executive Officer David Duffy said.

Net interest margin – the difference between what banks earn from loans and pay for deposits – fell to 1.66% from 1.78% on the back of stiff competition in the industry. The company expects net interest margin for the current year to be around 1.60% to 1.65%.

Virgin Money UK still reported a 4.6% growth in deposits to 63.8 billion pounds, as lending to businesses helped offset a slowdown in the mortgage market.

($1 = 0.7794 pounds)

(Reporting by Pushkala Aripaka and Muvija M in Bengaluru; Editing by Shounak Dasgupta)

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