Virgin Money boosts its profits after Northern Rock acquisition

Staff receive 5% pay bonus after group goes from £2.5m loss to £53.4m underlying profit

Virgin Money chief executive Jayne-Anne Gadhia
Virgin Money chief executive Jayne-Anne Gadhia

Virgin Money, which took over nationalised lender Northern Rock in January 2012, is set for major growth after a year that saw significant improvements in the bank’s profitability and the laying of foundations for a shift into the retail savings market.

Financial results for the firm, which took over the former Northern Rock headquarters in Newcastle, show that in 2013, it achieved an underlying profit of £53.4m, compared to a underlying loss of £2.5m in 2012. Statutory profit before tax, meanwhile, rose from £150.6m to £179.4m, while total assets increased 13% to £24.6bn and the firm’s net interest margin (NIM) went from 0.54% to 1.26%.

Throughout the period, Virgin Money took on 250 permanent staff, with 180 new posts being created in Newcastle, bringing the total employed in the North East to around 1,800.

All of the group’s 2,750 staff received a bonus worth 5% of their basic pay as a thank you for helping the group exceed already-ambitious goals as it continues to expand its range of services.

Chief executive Jayne-Anne Gadhia said she was “delighted” with the performance and stressed that the efforts of staff and a commitment to customer satisfaction had played a crucial role.

“When we first acquired Northern Rock, we were absolutely blessed by the fact that, in the North East, people welcomed us with open arms,” she added.

“We wanted to achieve a high level of growth and make this a success for everyone. However, when you acquire a business with a history like Northern Rock’s it’s always difficult to know it’s absolutely going to go to plan. But we have exceeded our expectations so far.”

During the year, Virgin Money saw 800,000 new customers come on board, with retail savings balances and mortgage balances both growing 17% to £21.1bn and £19.6bn respectively.

Gross mortgage lending, meanwhile, rose 12% to £5.6bn.

Now, the firm is concentrating on becoming a full retail savings bank, with a current account being trialled among staff, and a new credit card business being created, after the acquisition of £1bn of credit cards from MBNA.

Gadhia said: “This will make us a full service bank, with room for even more growth in the future.”

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