VIRGIN Money, the institution which owns the former Clydesdale Bank, has declared it is on track to make annual savings of around £200 million, following its latest round of branch closures.

And it warned further job cuts will come as part of its restructuring activity this year.

The bank slashed its branch network by around 30%, reducing the total to 91, and cut its office footprint by around 35% in a restructuring programme announced in July that was completed in its first quarter. It noted that there would be “further opportunities for property rationalisation”, citing the example of its Glasgow head office consolidation.

The bank said the moves have resulted in a reduction in full-time equivalent posts of around 150 and stated yesterday that it expects further reductions in FTEs during the year.

“We are also looking to make increasing use of other more cost-effective geographies for outsourced activities,” Virgin said. “We continue to drive digital customer engagement, including the withdrawal of passbook savings accounts for customers and have made further progress in modernising our technology infrastructure, with the ongoing adoption of Microsoft Azure, scaling the use of cloud services across the bank.”

The update came as the bank reported results for its first quarter, which revealed a 2.2% fall in mortgage balances against the backdrop of high interest rates. The base rate currently stands at 5.25%, following a series of rises from the historic low of 0.1% in December 2021. It has been held at 5.25% since August 2023.

Virgin Money said mortgage balances stood at £57.1 billion in the first quarter, compared with £58.4bn in first three months of the previous year, and £57.5bn at the end of its last financial year. The bank said the fall reflected its “disciplined approach to trading in [a] subdued market”, though added that there have been “early signs that market activity has improved in January, increasing back to 2019 levels”.

Lower mortgage rates are expected to give consumer sentiment a boost, as interest rates have now "peaked", the bank predicted. However, provisions for bad loans grew to nearly £640m from £617m in the previous quarter, meaning it set aside more cash for people falling behind on repayments.

Meanwhile, the bank reported business lending growth of 6.7% to £9bn compared with the first quarter of last year, with unsecured lending up 7.8% at £6.7bn. Overall customer lending dipped by 0.3% to £72.8bn and deposits rose by 1.7% to £67.3bn.

Virgin said its net interest margin, broadly the difference between the interest charged on loans with that paid on deposits, was unchanged at 1.89%. It expects its NIM to be “resilient over the remainder of the year, including reduced rate expectations”.

Chief executive David Duffy said: "We've delivered growth in new accounts, deposits and target lending segments, at stable margins and with ongoing cost efficiencies.

"We are encouraged by both our customers' resilience and improving sentiment in the mortgage market as interest rates have peaked.

"We carry good momentum into 2024 as we continue to successfully execute our strategy."

Shares closed up 2.1%, or 3.15p, at 152.85p.