Page 1

VIRGIN MONEY UK 2 February 2021 Virgin Money UK PLC : First Quarter 2021 Trading Update Virgin Money UK PLC ( " VMUK " or the " Group " ) confirms that trading in the three months to 31 December 2020 was in line with the Board's expectations . David Duffy , Chief Executive Officer : " Virgin Money had a profitable and positive first quarter and continued to prioritise our customers and colleagues through this uncertain external environment including through payment holidays and Government lending schemes . We have made a good start to the year with the launch of new customer propositions , further roll - out of our rebrand programme and a return to statutory profit , while maintaining a disciplined approach . The Group remains strongly capitalised and we have good momentum as we look out into the remainder of the year . Given the current UK - wide restrictions and ongoing uncertainty , we maintain the cautious economic outlook we outlined in November and our full year guidance remains broadly unchanged . Looking ahead , the vaccine roll - out and EU trade deal are encouraging for the UK's economic recovery and we remain focused on disrupting the market through a variety of innovative new products and propositions with a customer and brand experience that is the best in the market . " Q1 Summary - Resilient pre - provision earnings , low cost of risk ; FY21 guidance re - affirmed Stable balances reflect pricing discipline and COVID - 19 restrictions on customer behaviour Customer deposits increased in Q1 by 0.9 % to £ 68.1bn as further COVID - 19 restrictions drove lower Personal customer spending and Businesses continued to maintain high levels of liquidity Q1 Mortgages reduced ( 0.2 ) % to £ 58.2bn as the Group focused on margin management and prudent underwriting standards given the uncertain macroeconomic outlook Q1 Business lending was + 0.1 % higher at £ 8.9bn with lower BAU balances offset by growth in Government - backed loans ; BBLS : + 14 % to £ 923m , CBILS / CLBILS : + 19 % to £ 422m Q1 Personal lending reduced ( 2.0 ) % to £ 5.1bn as the impact of COVID - related restrictions resulted in lower retail card spending and reduced demand for personal loans Stable Net Interest Margin ( NIM ) as expected ; Favourable deposit pricing opportunities NIM was stable in Q1 at 152bps ( Q4 : 152bps ) , as expected , with higher liquidity and lower hedge contributions offset by an improving mix and cost of deposits , and supportive mortgage spreads The Group continues to expect a broadly stable FY21 NIM ( vs FY20 level 156bps ) , based on the current economic outlook and interest rate expectations with the balance of risks and opportunities currently weighted to the upside Deposit pricing dynamics are supportive looking forward through the remainder of 2021 Low impairment charge reflects stable asset quality ; Continued cautious economic outlook Maintained cautious IFRS 9 economic scenarios and weightings from FY20 , with updated overlays reflecting recent experience and expert credit judgment The Group has not seen material changes in asset quality or specific provisions to date - the extension of Government support sees only a very modest increase in arrears relative to FY20 Balance sheet credit provisions of £ 726m ( FY20 : £ 735m ) ; coverage of 99bps ( FY20 : 102bps ) Cost of risk 10bps ( FY20 : 68bps ) reflects no change in economics or material specific provisions CET1 ratio benefitted from lower RWAS driven by planned initiatives & HPI increases CET1 ratio increased c.50bps to 13.9 % , including c.40bps from software intangible changes , c.10bps from the delivery of Business RWA opportunities , partly offset by a £ 49m charge for PPI in the period equivalent to 19bps The Group notes the PRA's anticipated consultation on eligibility of software intangible assets , and now expects a c.13 % CET1 ratio in September 2021 , excluding the intangible asset benefit , subject to the evolution of the economic environment P2A CET1 requirement reduced from 2.5 % to 2.2 % ; Reduced CRD IV CET1 minimum to 9.2 % Significant c . £ 1.0bn buffer above CRD IV minimum requirement ( excluding software intangible benefits ) ; £ 726m of provisions , leaves the Group cautiously positioned for an uncertain outlook