Virgin Money hit by £450m PPI bill

virgin money

Virgin Money is preparing to take a hit of up to £450m from PPI mis-selling compensation that is likely to deepen its multimillion-pound losses — casting a shadow over its expansion plans.

The lender, bought by Clydesdale and Yorkshire Banking Group (CYBG) last year, is expected to make a hefty final provision for the payment protection insurance debacle, which has cost the banking industry £50bn so far.

Analysts forecast that PPI and other mis-selling charges, as well as restructuring expenses from CYBG’s £1.7bn acquisition, will drag the bank to a £250m loss for the year to the end of September.

“They will be reporting a material loss courtesy of the PPI charge,” said Investec analyst Ian Gordon. “It screams out as a cheap bank now.” The share price has fallen from 200p in July to 143.7p, largely thanks to a bleaker economic outlook, low interest rates and PPI worries.

CYBG posted a £144m annual loss, also because of PPI, prior to completing its takeover of Virgin Money.

The results will deal a blow to chief executive David Duffy, who will roll out the first current account under the Virgin Money brand in the coming weeks. He is also preparing to open three Virgin Money branches under the new brand in London, Manchester and Birmingham. Clydesdale and Yorkshire banks have 159 branches, Virgin Money has 74.

Duffy, who earned £1.8m last year as head of CYBG, is spending £60m on rebranding in an attempt to win current accounts from the big four to bolster Virgin Money’s 6.4m customer base.

TSB chief executive Debbie Crosbie will deliver a sweeping cost-cutting plan tomorrow that promotes the bank’s new technology, just days after thousands of customer payments were stalled.

Crosbie, 49, is expected to praise an IT system that has allowed TSB to push into the business banking market. She is also set to announce about 100 branch closures from the bank’s 540-strong network, which unions say could lead to 400 job losses. TSB employs 7,800 people.

Each branch is said to cost about £150,000 a year, so closures could bring £15m of annual savings.