THE chief executive of Clydesdale Bank owner Virgin Money has declared that it is “too early to tell” whether a further referendum on Scottish independence would affect business investment and the recovery from coronavirus, as it made nearly £60m of fresh provisions for payment protection insurance claims.

David Duffy’s comments came as the bank reported underlying profits had more than doubled in the first half as it cut provisions for bad debts arising from coronavirus. Shares fell nearly six per cent in early trading before rallying later in the day, closing down 2.4p at 198.3p.

The Virgin results were unveiled on the eve of today’s Scottish election, with polls varying as to the extent of an SNP expected win.

Alison Rose, chief executive of Royal Bank of Scotland owner NatWest Group, declared last week that the institution would move its headquarters to London from Edinburgh in the event of Scottish independence when asked how it would respond to a further referendum.

Asked for his view on the impact a further independence referendum could have on business, Mr Duffy said: “I think it is a great imponderable. From our perspective, it is impossible to tell. There are so many variables – currencies, timing – that it is impossible to tell.

“Our view on the economy right now, including Scotland, is that consumers are beginning to spend again. We are seeing credit cards showing people moving up to the month of April up to 94% of pre-pandemic levels. I think the recovery is under way and I am optimistic about medium-term growth, and I think the timing of a referendum, and the structure of any referendum [are] too hard to interpret at this time.”

Virgin reported an underlying profit of £245 million for the six months ended March 31, up from £120m at the same stage last year, with Mr Duffy signalling that the bank was “cautiously optimistic about the improving outlook.”

Virgin did not emulate NatWest Group and Lloyds Banking Group, which last week released some provisions for bad debts arising from the pandemic. However, the bank slashed impairment losses on credit exposures to £38m from £237m last year.

Clifford Abrahams, the bank’s new chief financial officer, said while the bank had thought “quite carefully” about releasing provisions, it “felt there was still some uncertainty” over how the economy will respond when Government subsidies are withdrawn. Mr Abrahams, who joined from ABN Amro in March, told The Herald: “We have basically maintained our provision – [it is] quite a low impairment charge. We will take it step by step. As that economic uncertainty unwinds, you will see the effect of that play through to impairments over time.”

Although Mr Duffy said it had been a “strong” first half, the bank appeared to catch investors off guard by booking £173m of exceptional items.

The one-offs included nearly £100m related the integration of Clydesdale’s former owner with Virgin Money, and a further provision of £59m for payment protection insurance (PPI) claims. Virgin hopes it will be the final charge it takes for PPI.

After exceptional items, the bank made a statutory pre-tax profit of £72m, following a £7m loss last year. Mr Abrahams said while PPI was “drawing to a close… it was a meaningful charge this half-year.”

He added: “We are dealing with the very last claims, and so we are hopeful that really is the final charge.”

Virgin highlighted its progress in the digital arena yesterday, and declared that the experience of the last year has shown that its strategy to become a “purpose-led, digitally focused bank” is proving to be the “right one”.

Asked by one journalist if it planned to shut more branches this year, following its move last year to reactive plans that led it to shrink its Scottish estate to 55, Mr Duffy said the “digital push is really about serving customers in whatever way they want to be served.”

He added: “We have no particular additional plans in our minds to do anything around branches.

“We are looking at the overall behaviour of customers and we will come to a better view on that by the end of this year.”

While that review would look at branch usage, he said: “We also have to recognise there is a need to provide access for older people. There is also a need to provide co-working space for some SMEs, which we do, and access to employees who may chose to work in a branch locally.”

John Moore, senior investment manager at Brewin Dolphin, said: “Virgin Money’s results largely mirror Lloyds’ last week, with the bank rebounding to profit, maintaining a steady net interest margin, and registering lower impairment charges.”