UK lender Virgin Money has set aside £726m to protect its balance sheet from potential loan losses, after a "modest" increase in customers needing additional support after exiting pandemic payment holidays.
The UK's sixth-largest lender was set up to challenge the dominance of bigger British banks.
It said today that it had granted mortgage payment holidays on £12.1 billion of loans as at December 31, equivalent to around 21% of balances, compared with £11.9 billion at its full-year.
It had said it would set aside £735m last year.
"Recent further restrictions across the UK as a result of record infection levels are likely to delay the pace of normalised economic and transaction activity," the company said.
"As a consequence, VMUK continues to adopt a cautious view on economic assumptions and this is reflected in coverage levels, underwriting standards and liquidity levels," it added.
Virgin Money also posted a 0.3% fall in the size of its loan book to £72.2 billion during its first quarter, as fresh coronavirus restrictions put pressure on household borrowing.
However, business lending was 0.1% higher in the three months to December 31, with UK government-backed lending via the Bounce Back Loan scheme up 14% to £923m and lending via larger Coronavirus Business Interruption Scheme up 19% to £422m.
In addition to subdued retail lending activities, the bank has also been hit by near-zero interest rates set by the Bank of England last year to reboot a coronavirus-hit economy. Net interest margin (NIM) stagnated at 1.52% during the three-month period.
Virgin Money, which serves 6.4 million customers across the UK, said that NIM in the current year would be broadly flat.
It said it turned a statutory profit in the first quarter after a £141m loss in its last fiscal year.
