Annual Report and Accounts
Virgin Money UK PLC
For the 18-month period ended 31 March 2025
Company Number: 09595911
Virgin Money UK PLC
Annual Report and Accounts
For the 18-month period ended 31 March 2025
Contents
Officers and professional advisers 2
Strategic report
3
Risk report
8
Governance report
80
Report of the Directors
101
Statement of Directors’ responsibilities
105
Independent auditor’s report to the members of Virgin Money UK PLC
106
Consolidated financial statements
119
Notes to the consolidated financial statements
125
Company financial statements
187
Notes to the Company financial statements
191
Glossary
197
Abbreviations
202
Other information
203
Forward-looking statements
204
Overview
Virgin Money UK PLC ('Virgin Money', 'VMUK' or 'the Company’), together with its subsidiary undertakings (which together comprise ‘the
Group’), operate under the Clydesdale Bank, Yorkshire Bank and Virgin Money brands. It offers a range of banking services for both retail
and business customers through retail stores, lounges, business banking centres, direct and online banking, and brokers. Following the
acquisition of the Group by Nationwide Building Society (‘Nationwide’) on 1 October 2024, the Company’s accounting reference date was
changed from 30 September to 31 March in order to align to Nationwide’s accounting reference date. The results referred to in this Annual
Report and Accounts relate to the 18-month period ended 31 March 2025.
Certain figures contained in this document, including financial information, may have been subject to rounding adjustments and foreign
exchange conversions. Accordingly, in certain instances, the sum or percentage change of the numbers contained in this document may
not conform exactly to the total figure given.
The forward-looking statements disclaimer can be found on page 204.
2
Officers and professional advisers
Board Chair
David Bennett
Senior Independent Non-
Executive Director
Tim Wade
Independent Non-
Executive Directors
Elena Novokreshchenova
Lucinda Charles-Jones (appointed 22 January 2024)
Petra van Hoeken (appointed 1 July 2024)
Tracey Graham (appointed 23 January 2025)
Geeta Gopalan (resigned 30 June 2024)
Darren Pope (resigned 1 October 2024)
Non-Executive Director
Sara Weller (resigned 1 October 2024)
Executive Directors
Chris Rhodes (appointed 1 October 2024)
Gergely Zaborszky (appointed 4 March 2025)
David Duffy (resigned 1 October 2024)
Clifford Abrahams (resigned 15 December 2024)
Group Company
Secretary
Lorna McMillan
Registered office
Jubilee House
Gosforth
Newcastle upon Tyne
NE3 4PL
Independent auditors
Ernst & Young LLP
25 Churchill Place
Canary Wharf
London
E14 5EY
3
Strategic report
The Directors present their Strategic report for the 18-month period ended 31 March 2025.
Principal activities
The Group operates a full-service UK-focused retail and commercial banking business under the brand names ‘Virgin Money’ as
well as ‘Clydesdale Bank’ and ‘Yorkshire Bank’. The bank provides residential mortgages, personal and business current
accounts, savings, personal loans and credit cards, loans for small and medium businesses, and payment and transaction
services.
Business review
Summary balance sheet
31 Mar 2025
£m
30 Sep 2023
£m
Restated(1)
Customer loans:
71,119
72,304
of which Residential mortgages
55,586
57,561
of which Consumer lending
6,137
6,126
of which Business and commercial lending(2)
9,396
8,617
Other financial assets
17,384
17,792
Other non-financial assets
1,294
1,335
Total assets
89,797
91,431
Customer deposits
(70,383)
(66,827)
Wholesale funding(3)
(11,632)
(16,788)
Other liabilities
(2,231)
(2,564)
Total liabilities
(84,246)
(86,179)
Ordinary shareholders' equity
(4,858)
(4,658)
Additional Tier 1 (AT1) equity
(693)
(594)
Equity
(5,551)
(5,252)
Total liabilities and equity
(89,797)
(91,431)
Summary income statement
18 months to
31 Mar 2025
£m
12 months to
30 Sep 2023
£m
Restated(1)
Net interest income
2,542
1,762
Non-interest income
205
123
Total operating income
2,747
1,885
Total operating and administrative expenses
(2,169)
(1,219)
Operating profit before impairment losses
578
666
Impairment losses on credit exposures
(429)
(309)
Statutory profit on ordinary activities before tax
149
357
Tax expense
(39)
(122)
Statutory profit attributable to equity holders
110
235
(1)
The prior year has been restated following the alignment of the Group’s accounting policies and presentation basis with Nationwide. Refer to note 1.7 of
the financial statements for further details.
(2)
Includes government lending of £285m (30 September 2023: £625m). Business and commercial lending also includes £47m (30 September 2023: £59m)
of fair valued business loans which are classified separately on the balance sheet as financial assets at fair value through profit or loss (FVTPL).
(3)
Includes amounts drawn under the TFSME schemes (including accrued interest) of £910m (30 September 2023: £6,291m).
Basis of preparation note
The Strategic report included within the Group’s 2023 Annual Report and Accounts presented the Group’s results on both a
statutory and an underlying basis. Management previously excluded certain items from the Group’s statutory position to arrive at
an underlying basis of performance. Following the acquisition by Nationwide, the Group has moved to presenting its income
statement on a statutory only basis. As a result of the Company changing its accounting reference date to 31 March to align to
that of Nationwide, this Annual Report and Accounts covers the 18-month period ended 31 March 2025. Unless otherwise
stated, income statement commentaries throughout this document compare the 18 months ended 31 March 2025 to the 12
months ended 30 September 2023 and the balance sheet analysis compares the Group balance sheet as at 31 March 2025 to
the Group balance sheet as at 30 September 2023. The prior period comparatives have been restated following alignment of the
Group’s accounting policies and presentation basis with Nationwide, which includes updates to effective interest rate (EIR)
methodology.
4
Strategic report (continued)
Business review
The Group delivered a robust financial performance during the 18-month period to 31 March 2025, which included the
acquisition of the Company by Nationwide on 1 October 2024. Prior to the acquisition, the Group’s financial performance
remained solid. Since the acquisition, the Group has prioritised delivering business performance and growth, improving pricing
and fees, investing in customer service and building technology resilience and readiness for integration. We have launched
Nationwide and Virgin Money’s joint Blueprint for a modern mutual and our new purpose: Banking – but fairer, more rewarding,
and for the good of society. This marks the next step in our journey as we unite behind a joint purpose. Colleague engagement
remains positive based on our most recent survey, with 84% engagement overall, which was a record-breaking result for the
Group. During the period post-acquisition, the Group has made several changes to accounting policies and presentation to align
with the Nationwide reporting structure and has recognised additional costs associated with the acquisition and additional credit
impairments as a result of acquisition alignment activity, which altogether are reflected in the Group’s financial performance
during the period. We are also starting to prepare for a proposed Part VII transfer of assets and liabilities of Clydesdale Bank
PLC into Nationwide, as part of the wider programme to integrate the Virgin Money business with that of Nationwide.
Customer lending and deposits
On a statutory basis, customer lending reduced 1.6% during the 18-month period to £71.1bn as growth in Business and
commercial lending and broadly stable Consumer lending was more than offset by a reduction in Mortgages. Over the period,
Mortgage balances reduced 3.4% to £55.6bn, reflecting lower gross new lending in a subdued market. Business and
commercial lending increased by 9.0% to £9.4bn, supported by resilient demand across our specialised national sectors.
Consumer lending increased 0.2% overall to £6.1bn, as 4.8% growth in credit card balances offset lower personal loans and
overdrafts.
In the six months since the acquisition completed, the Group has seen a return to growth in overall statutory lending balances,
which increased by 0.4%, driven by Mortgages and Business and commercial lending. The Group continued to attract new
deposits throughout the 18-month period, including in the period post-acquisition, supporting overall deposit growth of 5.3% to
£70.4bn. The loan to deposit ratio fell from 108% to 101%.
Funding and liquidity
The Group has maintained a strong funding and liquidity position. The Group’s liquidity surplus continues to comfortably exceed
regulatory requirements with a 12-month average Liquidity Coverage Ratio (LCR) of 159% as at 31 March 2025 (12-month
average LCR as at 30 September 2023: 146%). The 12-month average Net stable funding ratio (NSFR) was 141% as at 31
March 2025 (12-month average NSFR as at 30 September 2023: 136%). The Group’s wholesale funding reduced 30.7% during
the period to £11.6bn in line with expectations, mainly reflecting £5.3bn of TFSME repayments and other wholesale funding
maturities, which more than offset new residential mortgage-backed securities (RMBS), Covered Bonds and MREL-eligible
senior instruments issued during the period. As previously disclosed, all new AT1, Tier 2 and MREL-eligible senior instruments
will be issued by Nationwide with down-streaming arrangements in place to ensure appropriate capital levels in Virgin Money
and Clydesdale Bank PLC.
Operating profit before impairment losses
Operating profit before impairment losses reduced during the period to £578m (12 months to 30 September 2023: £666m),
primarily due to the impact of recognising additional operating and administrative expenses relating to the acquisition by
Nationwide and investment in growth, service, risk management and operational resilience.
Net interest income of £2,542m (12 months to 30 September 2023: £1,762m) benefitted from growth in higher margin lending
and the reinvestment rate of the structural hedge, offsetting lower overall customer lending. Non-interest income of £205m
benefited from resilient customer activity and the acquisition of the remaining c.50% ordinary share capital in Virgin Money
Investments (VMI) in April 2024. These factors more than offset the impact of reduced fees in relation to credit cards, current
accounts and overdrafts, made since the Nationwide acquisition, and accounting presentation changes to align with Nationwide.
Operating and administrative expenses of £2,169m (12 months to 30 September 2023: £1,219m) included the recognition of
additional costs following the acquisition. These included one-off costs for the £250m TMLA(1) fee and irrevocable VAT on the
first instalment of £25m. Operating and administrative expenses in the period post-acquisition also included additional
investment to deliver improvements in customer experience, support integration readiness, as well as further improve regulatory
and operational resilience. The creation of 370 new jobs in Virgin Money contact centres and online chat channels since 1
October 2024 has significantly improved customer experience, with call answer rates increasing from 86% in October 2024 to
95% in March 2025.
(1)
Trademark licence agreement between Virgin Money and Virgin Enterprises Limited (Virgin Enterprises).
5
Strategic report (continued)
Impairment losses on credit exposures
Credit impairment losses of £429m, equivalent to an annualised cost of risk of 40bps (12 months to 30 September 2023: £309m,
equivalent to a cost of risk of 42bps), were mainly driven by acquisition impacts, including aligning the Group’s IFRS 9 expected
credit loss (ECL) estimation methodology with Nationwide and the adoption of Nationwide’s macroeconomic scenarios and
weightings. Overall, ECL provisions increased to £739m at 31 March 2025 (30 September 2023: £617m), resulting in
significantly higher aggregate provision coverage of 103bps (30 September 2023: 85bps). Excluding the impact of acquisition
alignment activity, which added c.£127m to credit impairment losses, the Group’s cost of risk was 28bps. Underlying arrears
levels across the Group’s lending portfolios remain stable, with some improvement seen in the final six months of the period.
Capital
The Group maintained a strong capital position with a CET1 ratio of 14.4% (30 September 2023: 14.7%) and a total capital ratio
of 19.6% (30 September 2023: 21.2%). The Group therefore retains a significant CET1 management buffer in excess of its
Capital Requirements Directive IV (CRD IV) minimum CET1 requirement of 11.1%. During the period, the Company issued
ordinary shares to Nationwide for cash consideration of £800m to mitigate the impact of the TMLA fee, acquisition impacts on
ECL and accounting alignment adjustments as set out in note 1.7 of the financial statements.
Key performance indicators (KPIs)
Following the Company’s acquisition by Nationwide, and with the results and performance of the business now included in
Nationwide’s Annual Report and Accounts, the Directors have considered whether to report on KPIs in the Group’s own Annual
Report and Accounts. The Directors have reflected on the Group’s new status as a wholly owned subsidiary within the
Nationwide group as well as the resulting change in stakeholders and while the Group continues to measure a range of
performance ratios including asset quality, funding, liquidity, and capital to assess the Group’s performance which are all
highlighted in the Risk report, the Directors are of the view that the inclusion of KPIs would not enhance an understanding of the
development, performance or position of the Group. Refer to page 197 for performance metrics definitions.
Future developments
Information about future developments is provided within the ‘principal risks’ and ‘emerging and evolving risks’ sections below.
Governance
Our commitment to good governance has continued to underpin our strategic delivery and ensures we continue to challenge our
assumptions and risks. Our Governance report can be found on pages 80 to 100.
Section 172 statement
In undertaking its duties, the Board continues to be mindful of the need to appropriately balance the interests and expectations
of the Group’s various stakeholders. In this report, we describe how we have considered and worked with our stakeholders as
we seek to achieve our purpose ‘Banking – but fairer, more rewarding, and for the good of society’. Details of s.172 compliance
can be found on pages 83 to 87.
The Strategic report was approved by the Board of Directors on 29 May 2025 and was signed on its behalf by:
Chris Rhodes
Chief Executive Officer
6
Strategic report (continued)
Risk management
The objective of risk management is to keep the bank safe, to ensure resilience and to put the customer interests at the centre
of our decision making to support good customer outcomes. Effective risk management supports the sustainable delivery of our
strategic objectives.
Following the acquisition by Nationwide in October 2024, the Group operates independent but aligned Enterprise Risk
Management Frameworks (ERMF) within this wider group, to ensure risks are managed in a consistent and rigorous way. The
ERMFs define how risks are managed within each business and set out the risk management responsibilities of colleagues
within an industry-standard three lines of defence model. They also ensure that all risks are appropriately and consistently
identified, assessed, managed, monitored, and reported. These frameworks are supplemented by Group level governance
which supports the Board to ensure risks are managed consistently and rigorously across the Group, with appropriate escalation
routes in place.
Principal risks
The Group’s principal risks are those which could result in events or circumstances that might threaten the Group’s business
model, future performance, solvency, liquidity and reputation. The Group’s principal risk categories are consistent with those
outlined in the Group’s September 2024 Interim Financial Results. An overview of the Group’s principal risks is set out below,
while further information can be found on pages 8 to 79 of the Risk report.
Risks
Description
Credit risk
Is the risk that a retail or business customer or counterparty fails to pay the interest or capital due on a
loan or other financial instrument. Credit risk needs to be managed through the life cycle of each loan
from origination to repayment, redemption, write-off or sale. It manifests in the products and financial
instruments that the Group offers, and in which it invests, and can arise in respect of both on- and off-
balance sheet exposures.
Financial risk
Is the risk that the Group cannot meet its obligations to repay depositors’ funds in a timely manner or that
there is insufficient ability to absorb losses. Several categories of risk are included (liquidity, funding,
capital, pension and market risks), that must all be managed in a way that maintains the confidence of
customers, investors, and regulators.
Model risk
Is the potential for adverse consequences from decisions based on incorrect or misused model outputs
and reports.
Regulatory and
compliance risk
Is the risk of failing to comply with relevant regulatory requirements and changes in the regulatory
environment, failing to manage legal risks effectively, or failing to manage a constructive relationship with
our regulators by not keeping them informed of relevant issues, not responding effectively to information
requests or not meeting regulatory deadlines.
Conduct risk
Is the risk of undertaking business in a way which fails to deliver good customer outcomes in line with the
Financial Conduct Authority’s (FCA’s) Consumer Duty and causes customer harm, and may result in
regulatory censure, redress costs and/or reputational damage.
Operational risk
Is the risk of loss or customer harm resulting from inadequate or failed internal processes, people and
systems or from external events, incorporating the inability to maintain critical services, recover quickly
and learn from unexpected/adverse events. Operational risk includes: change risk; third-party risk; cyber
and information security risk; physical and personal security risk; IT resilience risk; data management
risk; payment creation, execution and settlement risk; and people risk.
Economic crime risk
Is the risk that the Group fails to detect and prevent its products and services from being used to facilitate
economic crime, resulting in harm to customers, the Group and its reputation, or third parties. This
includes money laundering, terrorist financing, facilitation of tax evasion, sanctions, fraud, and bribery and
corruption.
Strategic and
enterprise risk
Is the risk of significant loss of earnings or damage from decisions or actions that impact the long-term
interests of the Group’s stakeholders, or from an inability to fund or manage required change projects or
adapt to external developments.
Climate risk
Is the risk of exposure to physical and transition risks arising from climate change.
7
Strategic report (continued)
Emerging and evolving risks
Emerging and evolving risks are current or future risks arising from internal or external events, with a material unknown or
unpredictable component, and the potential to significantly impact the future performance of the Group or prevent delivery of
good outcomes for our customers over the medium to long term (12 months +). Emerging and evolving risks are regularly
assessed, considering internal and external factors, with escalation and reporting to the Board.
Risks
Description
Geopolitical
environment
The geopolitical environment remains volatile, with ongoing global conflicts and a range of global tensions.
This uncertainty impacts the macroeconomic environment. Conflicts and disputes also have the potential to
disrupt supply chains and increase cyber threats and economic crime.
Macroeconomic
environment
The Group is inherently exposed to fluctuations in the UK's economic conditions, which are impacted by
global trade disputes. The economic environment remains uncertain, as interest rate levels and the growth
outlook continue to impact customer finances, as well as other institutions and counterparties. Government
policy continues to evolve, including in response to these challenges, with consequential impacts for the UK
economy.
Technology and
resilience
The combination of a rapidly evolving and increasingly complex technological environment, alongside the
increasing importance of services being available when customers need them, increases both the potential
for, and the impact of, outages and system failures.
Emergent
technologies
The emergence of viable generative artificial intelligence, as well as the continued development of
quantum computing and associated technologies, creates new risks and opportunities as they are
adopted internally, across the industry and potentially by malicious organisations or individuals.
Integration risk
There are a range of risks that could arise from integration activity following the acquisition by
Nationwide. These may include reputational risks arising from incidents, technology failure, people risks,
ineffective group governance and reporting, regulatory risks, and risk of unknowns.
Cyber
Given ongoing geopolitical tension, the threat of external parties exploiting cyber-security vulnerabilities
to gain access to data, system, or assets; disrupt services; or otherwise affect the Group, our staff, and
our customers, remains. Cyber-attacks are constantly evolving and increasing in terms of sophistication.
Climate change
The Group is exposed to both physical risks arising from climate change (such as damage to UK housing
stock and property) and transitional risks (such as lower economic growth and government policy impacts
on property values) as the country moves towards net-zero emissions. These threats continue to evolve as
government policy develops and green technologies mature.
8
Risk report
Risk exists in everything we do, from strategic change initiatives to day-to-day operational activities. Without risk we will never
achieve our strategic goals, but when taking risks, we must ensure we do so in an appropriate way.
Enterprise Risk Management Framework (ERMF)
The Group identifies and manages risk in line with the ERMF. It is made up of a number of components which, taken together,
supports the Group to effectively manage its risks by:
•
Establishing clear roles and responsibilities for day to day risk management activities;
•
Ensuring a consistent lifecycle for risk management across the Group;
•
Setting the standard definitions of risk management terms and classifications to ensure consistent application;
•
Determining how risk appetite is set;
•
Setting the governance mechanisms by which risk oversight is exercised and risk decisions are taken;
•
Setting out the role of policies across the Group; and,
•
Supporting delivery of a risk culture which is underpinned by our purpose.
Risk culture
The Group defines culture as the “unwritten rules” for how things work. It’s the unique blend of shared values, beliefs, and
behaviours that colleagues experience when at work. These inform and influence behaviours, actions and decision making. Risk
culture is a view of the Group’s culture through a risk lens, with a particular focus on the attitudes and behaviours of colleagues
in relation to risk awareness, risk taking, risk management and controls that shape decisions on risks.
The Group is committed to maintaining a sound risk culture in which:
•
Colleagues take personal responsibility for ensuring they are familiar with the Group’s policies which describe the rules
that everyone is expected to follow;
•
The Group’s senior leaders demonstrate the right ‘tone from above’ and leaders at all levels promote a positive attitude
to risk and compliance and encourage others to do so;
•
There is open and honest discussion and communication around risks and issues;
•
Lessons are learnt when things do go wrong; and,
•
Providing good customer outcomes is at the centre of our business, with a clear focus on supporting and empowering
our customers to make good financial decisions.
Risk culture is monitored and assessed and findings are reported to the Board Risk Committee. This allows for focus on risk
culture to be retained and provides an opportunity to address any identified areas of concern.
Risk appetite
Risk appetite is defined as the level and type of risk the Group is willing to assume within its risk capacity, to achieve its strategic
objectives. It includes qualitative and quantitative limits which inform strategies, targets, policies, procedures and other controls
that collectively ensure the Group remains within the Board’s approved appetite.
The Chief Risk Officer (CRO) is responsible for setting metrics and thresholds within which the business must operate, taking
into consideration risk developments, Group strategy and 1st line of defence input. Information on performance against relevant
risk appetite metrics, breaches and trends is reported regularly to the Executive Risk Committee and the Board.
9
Risk report (continued)
Risk policies
The Policy Management Framework (PMF) is in place to ensure that the material risks that the Group is exposed to are
comprehensively addressed through effective policies, which outline clearly how specific risks need to be controlled. Effective
policies provide colleagues with the guardrails within which they must operate, ensuring activities are undertaken within Board
approved risk appetite.
Risk management and internal controls
The Board actively monitors the Group’s risk management and internal control systems. A review of the effectiveness of those
systems has been performed incorporating all material financial, operational and compliance controls, to highlight and address
any material movement in the effectiveness of those controls since the last assessment. Overall, the control environment
remains stable, with the system of internal controls being broadly effective in managing the key risks to the Group, and an
appropriate level of monitoring and reporting to support effective decision making. Identification of any controls that require
enhancing are escalated as required and adequate action plans are put in place where necessary. These actions support the
on-going strengthening of the control environment in line with the Group’s evolving risk profile.
Risk governance and oversight
The Board is committed to high standards of corporate governance and the Group has a well-defined and well-structured
framework in place to support the aim of achieving long-term and sustainable growth. Included within the framework are a
number of committees with a specific risk management focus, although all committees consider risk matters in accordance with
the Group’s ERMF as part of their wider remit. The Group’s risk governance structure strengthens risk evaluation and
management, while also positioning the Group to manage the changing regulatory environment in an efficient and effective
manner. The following executive governance committees have been established under the authority of the CEO:
Committees
Risk focus
Executive Committee
The Executive Committee supports the CEO by setting the Strategic and Financial Plans for the Group,
overseeing the plan execution, approving strategic messaging, material investments, and the People related
strategy for the Group, overseeing culture, and setting the Group Purpose.
Executive Risk
Committee
The Executive Risk Committee (ERC) supports the CEO in having responsibility to oversee the management
of risk across the Group, taking a forward-looking perspective, anticipating changes in business conditions
and promoting risk awareness culture within the Group. The committee is serves to provide leadership focus
on key risk issues, including: setting the Group’s risk appetite and ensuring the Group maintains an effective
ERMF; assessing the principal and emerging risks facing the Group, including their management, controls
and mitigation; reviewing and approving the annual risk assurance plan and monitoring progress against the
plan; leading the development and embedding of a culture that supports risk awareness and the fair
treatment of customers; and exercising oversight over the effectiveness of the Risk Management function
(including Compliance).
The Executive Risk Committee is supported by the following committees:
Non-Financial Risk
Committee
The Non-Financial Risk Committee is responsible for: recommending the Group risk appetite thresholds to
the Executive Risk Committee for the Group’s non-financial risks; recommending non-financial risk policy
statements and standards and elements of the risk and control self-assessment, control effectiveness
statement, and risk management framework to the ERC; and overseeing non-financial risk performance
thresholds.
Credit Risk Committee The Credit Risk Committee (CRC) is responsible for recommending the Group Credit Risk policy statement
and standards; approving the credit risk framework, decisioning strategies, changes to credit provisioning
methodology and specific provisions; approving the Group credit commitments in line with the Delegated
Commitment Authority (DCA) framework; and overseeing Group credit risk performance.
Model Governance
Committee
The Model Governance Committee supports the Executive Risk Committee and endorses the Group model
risk policy and rating systems, rating assignment, risk parameters, model materiality thresholds and
independent validation; oversees the purpose, use and scalability of models, and the performance of rating
systems, risk exposure and parameters; and reviews the Group internal ratings-based (IRB) self-
assessment.
In addition, the ERC delegates authority to the Reward Risk Adjustment Committee for matters relating to risk adjustment of
variable remuneration. Technical committees established under the CEO include the Purpose Council which oversees the
embedding of purpose across the Group and the Disclosure Committee, which is responsible for compliance with disclosure obligations.
The Executive Committee is supported by three sub-committees: the Environment Committee, the Operating Committee and the
Asset and Liability Committee (ALCO).
10
Risk report (continued)
Risk governance and oversight (continued)
Three lines of defence
Effective operation of a three lines of defence model is integral to the Group’s approach to risk management and is based on
the overriding principle that risk capability must be embedded within the first line of defence teams to be effective. This principle
embodies the following concepts:
•
risk management responsibilities are clearly understood and adhered to by all colleagues when carrying out their day-
to-day activities;
•
risk management decisions are made with proactive consideration of the potential risk and impact on customers;
•
business areas must self-identify and report management issues, which are captured centrally, showing good levels of
risk awareness, management remediation, and promoting a strong risk culture; and
•
regular control assessments are undertaken to confirm the effectiveness of the control environment, based on control
monitoring and testing, in relation to both the current and emerging and evolving risk profile.
Control is exercised through a clearly defined delegation of authority framework, with communication and escalation channels
throughout the Group.
First line of defence
The first line of defence covers most roles across the Group and incorporates business units and associated support functions.
The first line of defence is responsible for owning, identifying, mitigating and reporting internal and external risks and issues,
with a focus on a strong, well-designed, tested and evidenced control environment.
Second line of defence
The second line of defence is independent to the first line and comprises of the Risk function. The second line of defence
designs and owns the risk methodologies, risk appetite, policy and risk management frameworks, as well as providing oversight,
challenge, assurance and advice, with appropriate escalation and reporting.
Third line of defence
The third line of defence is independent to the first and second lines and is made up of the Internal Audit function. The third line
of defence provides independent assurance over the risk management, governance and internal control processes.
Stress testing
Stress testing is an important and widely recognised risk management tool, used to assess the vulnerability of financial
institutions and identify risks under adverse economic scenarios. The Group uses stress testing in strategic, capital and liquidity
planning, and to inform risk appetite, risk mitigation and contingency planning.
The Group undertakes stress testing using specific idiosyncratic scenarios and following the Basel Committee principles which
utilise, where appropriate, scenarios provided by the Bank of England (BoE).
The Board and senior management are actively involved in the stress testing process, reviewing, challenging and approving all
aspects of stress testing, from the consideration of scenarios to be tested, to the outcomes and mitigating actions. The
involvement of the Board and senior management is considered essential for the effective operation of stress testing and the
manner in which the results inform strategic planning and risk appetite. Reverse stress testing is also undertaken to assess the
types of risk that would pose fundamental threats to the viability of the Group’s business model.
11
Risk report (continued)
Credit risk
Sections
Page
Tables
Page
Credit risk overview
12
Managing credit risk within our asset portfolios
12
Risk appetite
12
Measurement
12
Mitigation
12
Credit assessment and mitigation
12
Collateral
14
Monitoring
15
Forbearance
15
Measuring credit risk within asset portfolios
15
ECL Methodology
16
Accounting and regulatory credit loss frameworks
17
Group credit risk exposures
18
Maximum exposure to credit risk on financial assets,
contingent liabilities and credit-related commitments
18
Key credit metrics
19
Key credit metrics
19
Key asset quality ratios
19
Gross loans and advances ECL coverage
20
Stage 2 balances
22
Credit risk exposure and ECL, by internal probability of
default (PD) rating by IFRS 9 stage allocation
23
IFRS 9 staging
25
Residential mortgage credit performance
27
Breakdown of Residential mortgage portfolio
27
Residential mortgage portfolio interest rate portfolio
27
Collateral
28
Average LTV of Residential mortgage portfolio by
staging
28
Forbearance
29
Forbearance
29
IFRS 9 staging
30
IFRS 9 staging
30
Consumer lending credit performance
32
Breakdown of Consumer lending portfolio
32
Forbearance
32
Forbearance
32
IFRS 9 staging
33
IFRS 9 staging
33
Business and commercial lending credit performance
35
Breakdown of Business and commercial lending portfolio 35
Forbearance
36
Forbearance
36
IFRS 9 staging
37
IFRS 9 staging
37
Business and commercial collateral
39
Business and commercial collateral
39
Other credit risks
39
Offsetting of financial assets and liabilities
39
Offsetting of financial assets and liabilities
40
Macroeconomic assumptions, scenarios, and weightings
40
Scenarios
40
Macroeconomic assumptions
40
Base case 2025 v 2023
42
Five-year simple averages for the most sensitive inputs
of unemployment, GDP and HPI
42
The use of estimates, judgements and sensitivity analysis 43
The use of estimates
43
Economic scenarios
43
ECL sensitivities
43
The use of judgement
45
SICR threshold triggers
45
Significant adjustments made in modelling provisions
45
Impact of Management Adjustments (MA) on the
Group’s ECL allowance and coverage ratio
46
Macroeconomic assumptions
48
12
Risk report (continued)
Credit risk (continued)
Outlook
The Group expects modest growth in the UK economy, with inflation expected to return to target in the years ahead. House
prices are expected to grow steadily, whilst Bank rate is likely to be eased gradually. The outlook remains uncertain, given
heightened geopolitical tensions, emerging policies of the UK Government and US trade policies.
The Group remains vigilant to the uncertainties within the geopolitical and economic landscape, assessing its impact on
borrowers and the credit risks affecting our lending portfolios to ensure appropriate actions are taken to support our customers.
To date, borrowers have remained resilient to affordability pressures and whilst arrears are expected to rise from their current
levels, they are expected to remain relatively low.
Managing credit risk within our asset portfolios
Credit risk is the risk that a retail or business customer or counterparty fails to pay the interest or capital due on a loan, or other
financial instrument. Credit risk needs to be managed through the life cycle of each loan from origination to repayment,
redemption, write off or sale. Credit risk manifests itself in the products and financial instruments that the Group offers, and in
which it invests, and can arise in respect of both on- and off-balance sheet exposures. Close monitoring, clear policies and a
disciplined approach to credit risk management support the Group’s operations and have underpinned its resilience.
Risk appetite
The Group controls its levels of credit risk by placing limits, via its risk appetite statement (RAS), on the amount of risk it is
willing to take in order to achieve its strategic objectives. This approach involves a defined set of quantitative limits in relation to
its credit risk concentrations to one borrower, or group of borrowers, and to product, industry and geographical segments. The
management of credit risk within the Group is achieved through timely changes to application scorecards and credit strategies,
ongoing approval and monitoring of individual transactions, regular asset quality reviews and the independent oversight of credit
decisions and portfolios.
The Group maintained a controlled approach to portfolio management and appetite for new lending origination against an
uncertain external environment, with updates to underwriting lending assessments to reflect the uncertain economic
environment and interest rate pressures. The risk appetite continues to focus on tail risks and higher risk customer segments or
concentrations to ensure mix and quality are appropriately managed through the life cycle.
Climate risk is a component of the ERMF and is included as a principal risk, further details can be found on page 79. Climate
risk considerations are embedded across various aspects of customer lending and credit risk management practices.
Measurement
The Group uses a range of statistical models, supported by both internal and external data, to assess credit risk exposures.
These models underpin the IRB capital calculation for the Residential mortgage and Business and commercial lending
portfolios, and account management activity and acquisition assessments for all portfolios. Further information on the
measurement and calculation of ECL and the Group’s approach to the impairment of financial assets can be found on page 15.
As highlighted on page 7 of the Strategic report, the geopolitical environment and macroeconomic environment are emerging
risks for the Group and include the future impact on macroeconomic variables, which are used in the calculation of the Group’s
modelled ECL output. Further detail on the Group’s use of macroeconomic variables in the period can be found on pages 40 to
49.
Mitigation
The Group maintains a dynamic approach to credit management and takes appropriate steps if individual issues are identified,
or if credit performance has, or is expected to, deteriorate due to borrower, economic or sector-specific weaknesses.
The mitigation of credit risk within the Group is achieved through approval and monitoring of automated credit strategies,
individual transactions, asset quality, analysis of the performance of the various credit portfolios, and oversight of credit
portfolios across the Group. Portfolio monitoring techniques include customer, product, industry, geographic concentrations, and
delinquency trends, as well as considering layered risks where customers may have more than one higher risk characteristic.
The Group has taken additional steps to update affordability assessments in response to the economic environment. Credit risk
mitigation is also supported, in part, by obtaining collateral, and corporate and personal guarantees where appropriate across
the business portfolio. The key mitigating measures are described below.
Credit assessment and mitigation
Credit risk is managed in accordance with lending policies, the Group’s risk appetite and the ERMF. Lending policies and
performance against risk appetite are reviewed regularly.
13
Risk report (continued)
Credit risk (continued)
The Group uses a variety of lending criteria when assessing applications for Residential mortgage and Consumer lending
customers. The approval process uses credit scorecards, credit strategies and affordability assessments, and involves a review
of an applicant’s previous credit history using information held by credit reference agencies as well as internal information.
Manual underwriting assessments are also used as and when required. The Group also utilises quantitative thresholds, for
example debt to income ratios, as well as the ratio of borrowing to collateral. Some of these limits relate to internal approval
levels and others are hard limits above which the Group will reject the application.
For mortgages lending, the Group’s policy is to accept only within the maximum percentage LTV limit which in turn is subject to
loan size and customer income requirements. Product availability may change depending on market conditions and outlook.
For business and commercial lending customers, credit risk is further mitigated by focusing on business sectors where the
Group has specific expertise, and through limiting exposures on higher value loans and to certain sectors. When making credit
decisions for business customers the Group will routinely assess the primary source of repayment, most typically the cash
generated by the customer through its normal trading cycle. Secondary sources of repayment are also considered and while not
the focus of the lending decision, collateral will be taken as appropriate. The Group seeks to obtain security cover and, where
relevant, guarantees from borrowers.
Specialist expertise
Credit quality is managed and monitored by skilled teams including, where required, specialists that provide dedicated support
for vulnerable customers experiencing financial or other types of difficulties. These specialists act within agreed delegated
authority levels set in accordance with experience and capabilities.
Credit strategy and policy
Credit risks associated with lending are managed through the application of detailed lending policies and standards that outline
the approach to lending, underwriting criteria, credit mandates, concentration limits and product terms. The Chief Credit Officer
and Credit Risk Committee provide a policy framework that identifies, quantifies and mitigates credit risk. These policies
and frameworks are delegated to, and disseminated under, the guidance and control of the Board and senior management, with
appropriate oversight through governance committees. Specialist credit teams provide oversight of credit portfolio performance
as well as adherence to credit risk policies and standards. Activities include targeted risk-based reviews, providing
an assessment of the effectiveness of internal controls and risk management practices. Bespoke assignments are also
undertaken in response to emerging risks and regulatory requirements. Independent assurance reviews are regularly
undertaken by Internal Audit.
Portfolio oversight
The Group’s credit portfolios, and the key benchmarks, behaviours and characteristics that are used to manage portfolios, are
regularly monitored, with portfolio monitoring packs provided for review by senior management.
Controls over rating systems
The Group has a Model Risk Management team that sets common minimum standards for risk models and associated rating
systems to ensure these are developed and monitored consistently, and are of sufficient quality to support business decisions
and meet regulatory requirements. The Group performs an annual self-assessment of its rating systems to ensure ongoing
Capital Requirements Regulation (CRR) compliance.
The Group also utilises other instruments and techniques across its wider balance sheet. These are summarised below:
Derivatives
The Group maintains control limits on net open derivative positions. At any one time, the amount subject to credit risk is limited
to the current fair value of instruments that are favourable to the Group (i.e. assets where the fair value is positive) and in
relation to derivatives, may only be a small fraction of the contract, or notional values associated with instruments outstanding.
This credit risk is managed as part of the customer’s overall exposure together with potential exposures from market
movements.
14
Risk report (continued)
Credit risk (continued)
Master netting agreements
The Group further restricts its exposure to credit losses by entering master netting arrangements with counterparties with whom
it undertakes a significant volume of transactions. Master netting arrangements do not generally result in an offset of balance
sheet assets and liabilities, as transactions are usually settled on a gross basis. However, credit risk associated with the
favourable contracts is reduced by a master netting arrangement to the extent that, if any counterparty failed to meet its
obligations in accordance with the agreed terms, all amounts with the counterparty are terminated and settled on a net basis.
Derivative financial instrument contracts are typically subject to the International Swaps and Derivatives Association (ISDA)
master netting agreements, as well as Credit Support Annexes, where relevant, around collateral arrangements attached to
those ISDA agreements. Derivative exchange or clearing counterparty agreements exist where contracts are settled via an
exchange or clearing house.
Collateral
The Group evaluates each customer’s creditworthiness on a case by case basis. The amount of collateral obtained, if deemed
necessary by the Group upon extension of credit, is based on management’s credit evaluation of the counterparty. Collateral
held as security, and other credit enhancements include the following:
Residential mortgages
Residential property is the Group’s main source of collateral on mortgage lending and means of mitigating loss in the event of
the default risk inherent in its residential mortgage portfolios. All lending activities are supported by an appropriate form of
valuation. This valuation is applied using either a physical valuation, or another method that is not reliant on a physical
inspection, but utilises data and modelled information, such as desktop, automated valuation model or indexed valuations
(subject to policy rules and requirements). It is the Group’s policy to dispose of repossessed properties, with the proceeds used
to reduce or repay the outstanding balance. The Group does not occupy repossessed properties for its own business use.
Commercial property
Commercial property is a source of collateral on Business and commercial lending and means of mitigating loss in the event of
default. For commercial loans, collateral comprises first legal charges over freehold, or long leasehold property (including formal
Companies House registration where appropriate). All commercial property collateral is subject to an independent, professional
valuation when taken and thereafter subject to periodic review in accordance with policy requirements.
Non-property related collateral
In addition to residential and commercial property-based security, the Group also takes other forms of collateral when lending.
This collateral can involve obtaining security against the underlying loan through the use of cash collateral and/or netting
agreements, both of which reduce the original exposure by the amount of collateral held, subject to volatility and maturity
adjustments where applicable. It can also include specific or interlocking guarantees, and loan agreements, which include
affirmative and negative covenants and, in some instances, guarantees of counterparty obligations. The Group also provides
asset-backed lending in the form of asset and invoice finance. Security for these exposures is held in the form of direct recourse
to the underlying asset financed. Generally, the Group does not take possession of collateral it holds as security, or call on
other credit enhancements, that would result in recognition of an asset on its balance sheet.
15
Risk report (continued)
Credit risk (continued)
Monitoring
Credit policies and procedures, which are subject to ongoing review, are documented and disseminated in a form that supports
the credit operations of the Group.
•
Credit Risk Committee: has oversight of the quality, composition and concentrations of the credit risk portfolio. It also
determines and approves credit risk strategies to adjust the portfolio performance for a number of factors, including
changes in market conditions.
•
Risk appetite measures: measures are reported monthly to ensure adherence to appetite. A formal annual review is
carried out to ensure that the measures accurately reflect the Group’s risk appetite, strategy and concerns relative to
the wider macro environment. All measures are subject to agreement with the Executive Risk Committee, with
Business Risk Appetite measures further approved by the Board.
•
Risk concentration: concentration of risk is managed by counterparty, product, geographical region and industry sector.
In addition, single name exposure limits exist to control exposures to a single counterparty. Concentrations are also
considered through the risk appetite process, focusing particularly on the external environment, outlook and
comparison against market benchmarks, as well as considering layered risks where customers may have more than
one higher risk characteristic.
•
Single large exposure excesses: excesses on exposures under the delegated commitment authority of the
Transactional Credit Committee are reported to the Committee when above defined limits. All excess reports include a
proposed route to remediation. Exposures are also managed in accordance with the large exposure reporting
requirements of the CRR.
•
Portfolio monitoring: continuous monitoring of the portfolio composition and performance is undertaken through monthly
reviews.
Forbearance
Forbearance is considered to exist where customers are experiencing, or about to experience, financial difficulty and the Group
grants a concession on a non-commercial basis. The Group’s forbearance policies and definitions comply with the guidance
established by the European Banking Authority for financial reporting. Forbearance concessions include the granting of more
favourable terms and conditions than those provided at drawdown of the facility, or conditions that would not ordinarily be
available to other customers with a similar risk profile. Forbearance parameters are regularly reviewed and refined as necessary
to ensure they are consistent with the latest industry guidance and prevailing practice, as well as ensuring that any assessment
adequately captures and reflects the most recent customer behaviours and market conditions.
Measuring credit risk within asset portfolios
At each reporting date, the Group assesses financial assets measured at amortised cost, as well as loan commitments and
financial guarantees, for impairment. The impairment loss allowance is calculated using an ECL methodology and reflects: (i) an
unbiased and probability weighted amount; (ii) the time value of money, which discounts the impairment loss; and (iii)
reasonable and supportable information that is available without undue cost or effort about past events, current conditions and
forecasts of future economic conditions.
The Group adopts two approaches in the measurement of credit risk: (i) modelled assessed – where the Group uses a
combination of strategies and statistical models that utilise internal and external data to measure the exposure to credit risk
within the portfolios (supplemented by management adjustments (MAs) where necessary); and (ii) individually assessed –
where a charge is taken to the income statement when an individually assessed provision (IA) has been recognised, or a direct
write-off has been applied to an asset balance.
16
Risk report (continued)
Credit risk (continued)
ECL methodology
ECL methodology is based upon the combination of probability of default (PD), loss given default (LGD) and exposure at default
(EAD) estimates that consider a range of factors that impact on credit risk and the level of impairment loss provisioning. The
Group uses reasonable and supportable forecasts of future economic conditions in estimating the ECL allowance. The
methodology and assumptions used in the ECL calculation are reviewed regularly and updated as necessary.
The calculated model ECL is determined using the following classifications:
Stage
ECL assessment period Description
1
12-month
An exposure that is not credit-impaired on initial recognition and has not experienced a
significant increase in credit risk (SICR) since initial recognition.
2
Lifetime
An exposure that has experienced a SICR since initial recognition but is not yet deemed
to be credit impaired.
3
Lifetime
An exposure that is credit impaired.
A Stage 2 ECL is required where a SICR has been identified, such as a deterioration in the PD since origination. Absent any
specific SICR factors, the Group operates a 30 DPD backstop for classification as Stage 2, and 90 DPD for Stage 3. Forborne
exposures can be classed as either Stage 2 or Stage 3 depending on the type of forbearance programme that has been applied
to the customer.
Individually assessed (IA) provisions are classed as Stage 3. When a loan is deemed uncollectable, and all necessary internal
procedures have been completed, it is written off against the related impairment loss. Subsequent recoveries of amounts
previously written off reduce the expense in the income statement.
Purchased or originated credit-impaired (POCI) financial assets are those that are assessed as being credit-impaired upon initial
recognition, and once classified as POCI, remain in Stage 3 until derecognition irrespective of any change in credit quality. The
Group regards the date of acquisition as the origination date for purchased portfolios.
SICR criteria and triggers are parameters subject to the same governance pathway as the Group’s IFRS 9 models; with
changes to triggers initially submitted to and endorsed by the Credit Model Technical Forum and formal approval provided by
the Model Governance Committee. The Provisions Adequacy Committee (PAC) considers provision adequacy, approves the
addition and removal of MAs and provides oversight on the adequacy of ECL provisioning. The Audit Committee provides
oversight to the ECL calculation and measurement, with reviews and robust challenge of all calculated outcomes and
management judgements. This includes the rationale behind the inclusion of MAs.
Following the acquisition by NBS, these committees were crucial in the harmonisation of the Groups IFRS 9 provision approach,
with that of NBS. The harmonisation activity consisted of the following key components:
•
Changes to the source of macroeconomic assumptions and selection of scenario weightings within the multiple
economic scenarios (MES) used in the calculation of ECL under IFRS 9;
•
Aligning the severe downside scenario to stressed ECL outcomes;
•
Aligning, where appropriate, judgmental Management Adjustments (MAs) and;
•
The assessment of the behavioural lifetime of revolving credit cards.
Further detail on the accounting policy applied to ECLs can be found in note 3.1.1 to the financial statements.
17
Risk report (continued)
Credit risk (continued)
Accounting and regulatory credit loss frameworks
The approach to calculating credit losses differs between the accounting and regulatory frameworks applicable to the Group,
with the most significant difference being that the concept of SICR, which moves exposures from a 12-month to a lifetime ECL
calculation in the accounting framework, does not exist under the regulatory framework. The approach to staging under IFRS 9
is also not applicable under regulatory credit loss reporting. Both frameworks calculate credit losses under a PD x LGD x EAD
approach, with the regulatory IRB approach assessing these in the next 12 months, whereas the accounting framework under
IFRS 9 requires these losses to be assessed on a forward-looking view, with a lifetime loss calculated where appropriate. Credit
losses are supplemented by MAs, where required, under the accounting framework. Both the accounting and regulatory
definitions of default are materially aligned, with default being triggered at 90 DPD, with the exception of the heritage Virgin
Money mortgage models, that apply a 180 DPD regulatory default trigger under existing approved permissions. The definition of
default will be fully aligned to 90 DPD when the regulatory models are updated in line with the hybrid model adoption.
Cure periods
The Group aligns the regulatory cure periods for forborne exposures in its IFRS 9 staging criteria (as Stage 2 or 3) at a minimum
period of either 24, or 36 months, depending on the forbearance programme utilised. Where exposures are classified as Stage 2
or 3 as a result of not being in a forbearance programme, these can as a general rule cure and transfer to the appropriate stage
when the relevant staging trigger is no longer applicable (i.e., there is no identifiable SICR or the exposure is no longer
considered credit-impaired) although this treatment can vary by portfolio (for example defaulted Cards remain in Stage 3 until
derecognition).
18
Risk report (continued)
Credit risk (continued)
Group credit risk exposures
The Group is exposed to credit risk across all of its financial asset classes, however, its principal exposure to credit risk arises
on customer lending balances. Given the relative significance of customer lending exposures to the Group’s overall credit risk
position, the disclosures that follow are focused principally on customer lending.
The Group is also exposed to credit risk on its other banking and treasury-related activities, and holds £10.9bn (30 September
2023: £11.3bn) of cash and balances with central banks and £0.4bn (30 September 2023: £0.7bn) due from other banks and
similar institutions at amortised cost, with a further £6.2bn (30 September 2023: £6.2bn) of financial assets at fair value through
other comprehensive income (FVOCI). Cash and balances with central banks includes £9.9bn of cash held with the BoE (30
September 2023: £10.2bn). Balances with other banks and similar institutions and financial assets at FVOCI are primarily held
with senior investment grade counterparties. All other banking and treasury-related financial assets are classed as Stage 1 with
no material ECL provision held.
Maximum exposure to credit risk on financial assets, contingent liabilities and credit-related commitments (audited)
31 March 2025
Gross
balances
Impairment
provisions(1)
Carrying
value
Credit-related
commitments
Maximum
credit risk
exposure
% of total
credit risk
exposure
£m
£m
£m
£m
£m
%
Residential mortgages
55,647
(61)
55,586
2,589
58,175
54%
Consumer lending
6,656
(519)
6,137
12,234
18,371
17%
Business and commercial lending
9,504
(159)
9,345
4,280
13,625
13%
Maximum credit risk exposure on
lending assets
71,807
(739)
71,068
19,103
90,171
84%
Cash and balances with central banks
10,882
10%
Financial instruments at FVOCI
6,197
6%
Due from other banks and similar
institutions
371
-
Other financial assets at fair value
49
-
Derivative financial assets
48
-
Fair value hedge adjustment
(116)
-
Maximum credit risk exposure on
all financial assets (2)
107,602
100%
30 September 2023
(Restated)(3)
Residential mortgages
57,618
(57)
57,561
2,685
60,246
55%
Consumer lending
6,555
(429)
6,126
11,242
17,368
16%
Business and commercial lending
8,684
(131)
8,553
4,073
12,626
12%
Maximum credit risk exposure on
lending assets
72,857
(617)
72,240
18,000
90,240
83%
Cash and balances with central banks
11,282
10%
Financial instruments at FVOCI
6,184
6%
Due from other banks and similar
institutions
681
1%
Other financial assets at fair value
61
-
Derivative financial assets
135
-
Fair value hedge adjustment
(492)
-
Maximum credit risk exposure on all
financial assets(2)
108,091
100%
(1) The total ECL provision covers both on and off-balance sheet exposures, which are reflected in notes 3.1.1.1 and 3.7 respectively. All tables and ratios that
follow are calculated using the combined on- and off-balance sheet ECL, which is consistent for all periods reported. Off-balance sheet exposures include
financial guarantees and other credit commitments.
(2) Unless otherwise noted, the amount that best represents the maximum credit exposure at the reporting date is the carrying value of the financial asset.
(3) The prior year balances have been restated following the alignment of the Group’s accounting policies and presentation basis with Nationwide. Refer to
note 1.7 for further details.
19
Risk report (continued)
Credit risk (continued)
In addition to the balance sheet position on the previous page, key metrics of relevance are as follows:
Key credit metrics (audited)
18 months to
31 Mar 2025
£m
12 months to
30 Sep 2023(2)
£m
Impairment charge on credit exposures
Residential mortgages
8
2
Consumer lending
350
269
Business and commercial lending
71
38
Total Group impairment charge
429
309
Impairment charge(1) to average customer loans (cost of risk (CoR))
0.40%
0.42%
Key asset quality ratios
Loans in Stage 2
11.63%
8.77%
Loans in Stage 3
1.89%
1.50%
Total book coverage
1.03%
0.85%
Stage 2 coverage
4.87%
6.25%
Stage 3 coverage
15.62%
11.77%
(1) Inclusive of gains/losses on assets held at fair value and elements of fraud loss.
(2) The prior year balances have been restated following the alignment of the Group’s accounting policies and presentation basis with Nationwide. Refer to note 1.7
for further details.
The total gross lending to customers reduced by £1.1bn to £71.8bn at 31 March 2025 (30 September 2023 restated: £72.9bn).
The total lending in the Residential mortgage portfolio reduced to £55.6bn at 31 March 2025 (30 September 2023 restated:
£57.6bn) with the demand for new lending reduced due to the higher rate environment, stressed affordability pressure and wider
cost of living considerations, although conditions have improved over the most recent period. The Business and commercial
lending portfolio has grown to £9.5bn at 31 March 2025 (30 September 2023: £8.7bn) with broad based growth across the
sector specialisms in our target market segments. The Consumer lending book has remained relatively stable at £6.7bn at 31
March 2025 (30 September 2023 restated: £6.6bn), with new business growth in the credit card portfolio partially offset by
reductions in Personal Loan and Current account borrowing.
The performance of the portfolio and overall asset quality remains robust and the proportion of the Stage 2 portfolio not past
due, remains high at 95% at 31 March 2025 (30 September 2023: 94%). The Group remains focused on reaching good
customer outcomes with the Group’s risk appetite and continued focus on responsible lending.
The Group has a total impairment provision of £739m at 31 March 2025, reflecting a 20% increase from £617m at 30
September 2023, and a corresponding increase in coverage to 103bps from 85bps. This increase has primarily been driven by
the harmonisation of the IFRS 9 methodology and calculations following the Nationwide acquisition, rather than any wider credit
deterioration within the lending portfolios.
Significant external economic and geopolitical factors continues to have the potential to impact the short to medium-term
performance of the portfolio.
Within the total provision held, the modelled and IA provision has increased to £661m (30 September 2023: £541m) driven by
the harmonisation. The selection of appropriate MAs is a major component in determining the Group’s ECL. The MAs have
remained broadly stable at £78m (30 September 2023: £76m) although the composition has changed due to the alignment with
Nationwide. Further detail on MAs can be found on page 46.
The increase in the impairment provision coupled with the individually assessed impairment charge of £370m in the period (30
September 2023: £142m) results in a net charge to the income statement of £429m (12 months to 30 September 2023: £309m)
and an associated cost of risk of 40bps (12 months to 30 September 2023: 42bps).
20
Risk report (continued)
Credit risk (continued)
Gross loans and advances(1) ECL and coverage (audited)
31 March 2025
Consumer lending
Residential
mortgages
Credit cards
Loans and
overdrafts
Combined
Business and
commercial
lending
Total
£m
%
£m
%
£m
%
£m
%
£m
%
£m
%
Stage 1
49,793
89.5%
4,724
76.7%
260
52.6%
4,984
74.9%
7,311
77.0%
62,088
86.5%
Stage 2 - total
5,292
9.5%
1,301
21.1%
16
3.2%
1,317
19.8%
1,741
18.3%
8,350
11.6%
Stage 2: 0 DPD
4,968
8.9%
1,244
20.1%
14
2.7%
1,258
18.9%
1,722
18.1%
7,948
11.1%
Stage 2: <30 DPD
129
0.2%
28
0.5%
1
0.2%
29
0.4%
9
0.1%
167
0.2%
Stage 2: >30 DPD
195
0.4%
29
0.5%
1
0.3%
30
0.5%
10
0.1%
235
0.3%
Stage 3(3)
562
1.0%
137
2.2%
218
44.2%
355
5.3%
452
4.7%
1,369
1.9%
55,647
100.0%
6,162
100.0%
494
100.0%
6,656
100.0%
9,504
100.0%
71,807
100.0%
ECLs(4)
Stage 1
10
16.7%
72
15.5%
4
6.6%
76
14.5%
33
21.0%
119
16.1%
Stage 2 - total
26
42.5%
323
69.6%
2
4.4%
325
62.7%
55
34.6%
406
55.0%
Stage 2: 0 DPD
17
29.0%
290
62.7%
1
2.0%
291
56.2%
55
34.6%
363
49.4%
Stage 2: <30 DPD
3
4.1%
14
2.9%
-
0.8%
14
2.7%
-
-
17
2.2%
Stage 2: >30 DPD
6
9.4%
19
4.0%
1
1.6%
20
3.8%
-
-
26
3.4%
Stage 3(3)
25
40.8%
69
14.9%
49
89.0%
118
22.8%
71
44.4%
214
28.9%
61
100.0%
464
100.0%
55
100.0%
519
100.0%
159
100.0%
739
100.0%
Coverage
Stage 1
0.02%
1.52%
1.42%
1.52%
0.46%
0.19%
Stage 2 - total
0.49%
24.83%
15.37%
24.72%
3.16%
4.87%
Stage 2: 0 DPD
0.36%
23.38%
8.49%
23.22%
3.19%
4.59%
Stage 2: <30 DPD
1.95%
49.10%
37.88%
48.67%
0.49%
9.99%
Stage 2: >30 DPD
2.94%
63.44%
59.71%
63.26%
0.36%
10.66%
Stage 3(3)
4.42%
50.46%
22.59%
33.32%
15.65%
15.72%
0.11%
7.53%
11.21%
7.80%
1.67%
1.03%
Undrawn exposures
Stage 1
2,463
95.1%
11,661
97.7%
265
86.9%
11,926
97.5%
3,581
83.7%
17,970
94.1%
Stage 2
113
4.4%
259
2.2%
-
-
259
2.1%
662
15.4%
1,034
5.4%
Stage 3(3)
13
0.5%
9
0.1%
40
13.1%
49
0.4%
37
0.9%
99
0.5%
2,589
100.0%
11,929
100.%
305
100.0%
12,234
100.0%
4,280
100.0%
19,103
100.0%
21
Risk report (continued)
Credit risk (continued)
Gross loans and advances (1) ECL and coverage (audited) (continued)
30 September 2023
(restated)(2)
Consumer lending
Residential
mortgages
Credit cards
Loans and
overdrafts
Combined
Business and
commercial
lending
Total
£m
%
£m
%
£m
%
£m
%
£m
%
£m
%
Stage 1
54,295
94.2%
4,459
76.5%
390
53.8%
4,849
74.0%
6,235
71.8%
65,379
89.7%
Stage 2 - total
2,766
4.8%
1,266
21.7%
329
45.3%
1,595
24.3%
2,027
23.3%
6,388
8.8%
Stage 2: 0 DPD
2,461
4.2%
1,199
20.5%
324
44.6%
1,523
23.2%
1,997
22.9%
5,981
8.3%
Stage 2: <30 DPD
102
0.2%
35
0.6%
2
0.3%
37
0.6%
14
0.2%
153
0.2%
Stage 2: >30 DPD
203
0.4%
32
0.6%
3
0.4%
35
0.5%
16
0.2%
254
0.3%
Stage 3(3)
557
1.0%
104
1.8%
7
0.9%
111
1.7%
422
4.9%
1,090
1.5%
57,618
100%
5,829
100%
726
100%
6,555
100%
8,684
100%
72,857
100%
ECLs(4)
Stage 1
13
22.6%
42
10.8%
4
12.1%
46
10.9%
30
22.6%
89
14.5%
Stage 2 - total
27
47.9%
294
74.9%
28
73.5%
322
74.8%
51
39.4%
400
64.7%
Stage 2: 0 DPD
23
42.0%
256
65.3%
25
67.1%
281
65.5%
51
39.2%
355
57.6%
Stage 2: <30 DPD
1
1.3%
17
4.3%
1
1.9%
18
4.1%
-
0.2%
19
3.0%
Stage 2: >30 DPD
3
4.6%
21
5.3%
2
4.5%
23
5.2%
-
-
26
4.1%
Stage 3(3)
17
29.5%
56
14.3%
5
14.4%
61
14.3%
50
38.0%
128
20.8%
57
100%
392
100%
37
100%
429
100%
131
100%
617
100%
Coverage
Stage 1
0.02%
0.95%
1.13%
0.96%
0.47%
0.14%
Stage 2 - total
0.99%
23.16%
8.16%
20.07%
2.55%
6.25%
Stage 2: 0 DPD
0.98%
21.31%
7.56%
18.38%
2.58%
5.95%
Stage 2: <30 DPD
0.74%
48.66%
35.30%
47.94%
1.42%
12.09%
Stage 2: >30 DPD
1.28%
64.90%
56.02%
64.16%
0.21%
9.88%
Stage 3(3)
3.03%
54.15%
77.16%
55.57%
11.83%
11.77%
0.10%
6.72%
5.03%
6.53%
1.51%
0.85%
Undrawn exposures
Stage 1
2,560
95.4%
10,493
96.2%
280
82.1%
10,773
95.8%
3,453
84.7%
16,786
93.3%
Stage 2
114
4.2%
387
3.6%
60
17.6%
447
4.0%
597
14.7%
1,158
6.4%
Stage 3(3)
11
0.4%
21
0.2%
1
0.3%
22
0.2%
23
0.6%
56
0.3%
2,685
100%
10,901
100%
341
100%
11,242
100%
4,073
100%
18,000
100%
(1)
Excludes loans designated at FVTPL, balances due from customers on acceptances, accrued interest and deferred and unamortised fee income.
(2)
The prior year balances have been restated following the alignment of the Group’s accounting policies and presentation basis with Nationwide. Refer to note
1.7 for further details. In addition to the restatements set out in note 1.7, the apportionment of balances such as accrued interest and deferred and unamortised
fee income between stages has been aligned to Nationwide. This has not impacted the total gross loans and advances balance shown within the table above.
(3)
Stage 3 includes POCI for gross loans and advances of £34m for Residential mortgages and £1m for Consumer lending (30 September 2023: £48m and £1m
respectively); and ECL of £Nil for Residential mortgages and (£1m) for Consumer lending (30 September 2023: (£1m) and (£1m) respectively).
(4)
Includes £4m ECL held for off-balance sheet exposures (30 September 2023: £5m), of which £1m (30 September 2023: £1m) is held under Stage 1, £2m (30
September 2023: £4m) under Stage 2 and £1m held under Stage 3 (30 September 2023: £Nil).
22
Risk report (continued)
Credit risk (continued)
Stage 2 balances (audited)
There can be a number of reasons that require a financial asset to be subject to a Stage 2 lifetime ECL calculation other than
reaching the 30 DPD backstop. The following table highlights the relevant trigger point leading to a financial asset being classed
as Stage 2:
31 March 2025
Consumer lending
Residential
mortgages
Credit cards
Loans and
overdrafts
Combined
Business and
commercial
lending
Total
£m
%
£m
%
£m
%
£m
%
£m
%
£m
%
PD deterioration
4,202
79%
905
70%
15
94%
920
70%
842
48%
5,964
71%
Forbearance
113
2%
17
1%
-
-
17
1%
280
16%
410
5%
AFD or Watch List (1)
1
-
-
-
-
-
-
-
609
35%
610
7%
> 30 DPD
195
4%
29
2%
1
6%
30
2%
10
1%
235
3%
Other (2)
781
15%
350
27%
-
-
350
27%
-
-
1,131
14%
5,292
100%
1,301
100%
16
100%
1,317
100%
1,741
100%
8,350 100%
ECLs
PD deterioration
14
54%
213
66%
1
50%
214
66%
21
38%
249
62%
Forbearance
2
8%
6
2%
-
-
6
2%
12
22%
20
5%
AFD or Watch List (1)
-
-
-
-
-
-
-
-
22
40%
22
5%
> 30 DPD
6
23%
19
6%
1
50%
20
6%
-
-
26
6%
Other (2)
4
15%
85
26%
-
-
85
26%
-
-
89
22%
26
100%
323
100%
2
100%
325
100%
55
100%
406 100%
30 September 2023
(Restated)(3)
Consumer lending
Residential
mortgages
Credit cards
Loans and overdrafts
Combined
Business and
commercial lending
Total
£m
%
£m
%
£m
%
£m
%
£m
%
£m
%
PD deterioration
1,780
65%
746
59%
325
99%
1,071
67%
1,258
62%
4,109
65%
Forbearance
83
3%
15
1%
1
-
16
1%
287
14%
386
6%
AFD or Watch List (1)
1
-
-
-
-
-
-
-
466
23%
467
7%
> 30 DPD
203
7%
32
3%
3
1%
35
2%
16
1%
254
4%
Other (2)
699
25%
473
37%
-
-
473
30%
-
-
1,172
18%
2,766
100%
1,266
100%
329
100%
1,595
100%
2,027
100%
6,388
100%
ECLs
PD deterioration
18
67%
143
49%
26
93%
169
52%
23
45%
210
52%
Forbearance
3
11%
5
2%
-
-
5
2%
14
28%
22
6%
AFD or Watch List (1)
-
-
-
-
-
-
-
-
14
27%
14
4%
> 30 DPD
3
11%
21
7%
2
7%
23
7%
-
-
26
7%
Other (2)
3
11%
125
42%
-
-
125
39%
-
-
128
31%
27
100%
294
100%
28
100%
322
100%
51
100%
400
100%
(1)
Approaching Financial Difficulty (AFD) and Watch markers are early warning indicators of Business customers who may be approaching financial difficulties. If
these indicators are not reversed, they may lead to a requirement for more proactive management by the Group.
(2)
Other refers primarily to rules using additional credit reference agency data as well as a number of smaller value drivers.
(3)
The prior year balances have been restated following the alignment of the Group’s accounting policies and presentation basis with Nationwide. Refer to
note 1.7 for further details.
23
Risk report (continued)
Credit risk (continued)
Credit risk exposure and ECL, by internal PD rating, by IFRS 9 stage allocation (audited)
The distribution of the Group’s credit exposures and ECL by internal PD rating is analysed below:
Stage 1
Stage 2
Stage 3(2)
Total
31 March 2025
Lending
£m
ECL
£m
Lending
£m
ECL
£m
Lending
£m
ECL
£m
Lending
£m
ECL
£m
PD range %
Residential mortgages
Strong
0.00 to < 0.15
36,621
1
1,710
-
-
-
38,331
1
0.15 to < 0.25
7,312
2
370
1
-
-
7,682
3
0.25 to < 0.50
4,182
2
1,034
2
-
-
5,216
4
0.50 to < 0.75
640
1
544
2
-
-
1,184
3
Good
0.75 to < 2.50
907
2
706
4
-
-
1,613
6
Satisfactory 2.50 to <10.0
99
1
495
7
-
-
594
8
10.0 to < 100
32
1
433
10
-
-
465
11
Default
100
-
-
-
-
562
25
562
25
Total
49,793
10
5,292
26
562
25
55,647
61
Consumer lending
Strong
0.00 to < 0.15
221
1
-
-
-
-
221
1
0.15 to < 0.25
143
1
-
-
-
-
143
1
Good
0.25 to < 0.50
677
5
3
-
-
-
680
5
0.50 to < 0.75
695
6
11
1
-
-
706
7
0.75 to < 2.50
2,354
34
91
8
-
-
2,445
42
2.50 to <10.0
890
28
737
135
-
-
1,627
163
Satisfactory 10.0 to < 100
4
1
475
181
-
-
479
182
Default
100
-
-
-
-
355
118
355
118
Total
4,984
76
1,317
325
355
118
6,656
519
Business and commercial
lending
Strong
0.00 to < 0.15
482
1
22
-
-
-
504
1
0.15 to < 0.25
602
-
7
-
-
-
609
-
0.25 to < 0.50
822
1
61
-
-
-
883
1
0.50 to < 0.75
438
1
126
-
-
-
564
1
Good
0.75 to < 2.50
3,190
10
556
8
-
-
3,746
18
2.50 to <10.0
1,772
20
820
32
-
-
2,592
52
Satisfactory 10.0 to < 100
5
-
149
15
-
-
154
15
Default
100
-
-
-
-
452
71
452
71
Total
7,311
33
1,741
55
452
71
9,504
159
24
Risk report (continued)
Credit risk (continued)
Stage 1
Stage 2
Stage 3(2)
Total
30 September 2023
(Restated)(1)
Lending
£m
ECL
£m
Lending
£m
ECL
£m
Lending
£m
ECL
£m
Lending
£m
ECL
£m
Residential
mortgages
PD range %
Strong
0.00 to < 0.15
36,393
3
390
-
-
-
36,783
3
0.15 to < 0.25
5,834
1
172
-
-
-
6,006
1
0.25 to < 0.50
7,656
2
440
1
-
-
8,096
3
0.50 to < 0.75
2,493
2
383
1
-
-
2,876
3
Good
0.75 to < 2.50
1,533
2
567
3
-
-
2,100
5
Satisfactory
2.50 to < 10.00
353
2
403
14
-
-
756
16
10.00 to < 100
33
1
411
8
-
-
444
9
Default
100
-
-
-
-
557
17
557
17
Total
54,295
13
2,766
27
557
17
57,618
57
Consumer lending
Strong
0.00 to < 0.15
232
1
-
-
-
-
232
1
0.15 to < 0.25
377
1
1
-
-
-
378
1
Good
0.25 to < 0.50
1,120
5
7
1
-
-
1,127
6
0.50 to < 0.75
920
5
12
1
-
-
932
6
0.75 to < 2.50
1,612
17
100
10
-
-
1,712
27
2.50 to < 10.00
582
16
1,032
148
-
-
1,614
164
Satisfactory
10.00 to < 100
6
1
443
162
-
-
449
163
Default
100
-
-
-
-
111
61
111
61
Total
4,849
46
1,595
322
111
61
6,555
429
Business and commercial
lending
Strong
0.00 to < 0.15
1,052
-
49
-
-
-
1,101
-
0.15 to < 0.25
94
-
17
-
-
-
111
-
0.25 to < 0.50
432
1
40
-
-
-
472
1
0.50 to < 0.75
266
1
54
-
-
-
320
1
Good
0.75 to < 2.50
1,569
5
301
3
-
-
1,870
8
2.50 to < 10.00
2,750
22
1,175
27
-
-
3,925
49
Satisfactory
10.00 to < 100
72
1
391
21
-
-
463
22
Default
100
-
-
-
-
422
50
422
50
Total
6,235
30
2,027
51
422
50
8,684
131
(1)
The prior year balances have been restated following the alignment of the Group’s accounting policies and presentation basis with Nationwide. Refer to note
1.7 for further details. In addition to the restatements set out in note 1.7, the apportionment of balances such as accrued interest and deferred and unamortised
fee income between stages has been aligned to Nationwide. This has not impacted the total gross loans and advances balance shown within the table above.
(2)
Stage 3 includes POCI for gross lending of £34m for Residential mortgages and £1m for Consumer lending (30 September 2023: £48m and £1m respectively);
and ECL of £Nil for Residential mortgages and (£1m) for Consumer lending (30 September 2023: (£1m) and (£1m) respectively).
In terms of the credit quality of the loan commitments and financial guarantee contracts, at least 97% classified as either ‘Good’
or ‘Strong’ under the Group’s internal PD rating scale (30 September 2023 (restated): 97%) and the level of default remaining
low.
25
Risk report (continued)
Credit risk (continued)
IFRS 9 staging (audited)(1)
The following table shows the changes in the loss allowance and gross carrying value of the portfolios. Values are calculated
using the individual customer account balances, and the stage allocation is taken as at the end of each month. The monthly
position of each account is aggregated to report a net closing position for the period, thereby incorporating all movements
an account has made during the 18 month period.
18 months to 31 March 2025
Stage 1
Stage 2
Stage 3(2)
Total
gross
loans
£m
Total
provisions
£m
Gross
loans
£m
ECL
£m
Gross
loans
£m
ECL
£m
Gross
loans
£m
ECL
£m
Income
statement
£m
Restated opening balance at 1 October
2023(3)
65,379
89
6,388
400
1,090
128
72,857
617
Transfers from Stage 1 to Stage 2
(4,870)
(11)
4,870
11
-
-
-
-
-
Transfers from Stage 2 to Stage 1
1,433
112 (1,433)
(112)
-
-
-
-
-
Transfers to Stage 3
(258)
(2)
(265)
(26)
523
28
-
-
-
Transfers from Stage 3
59
1
84
4
(143)
(5)
-
-
-
Net remeasurement of ECL arising from
transfer of stage
-
(97)
-
177
-
34
-
114
114
Net movement
(3,636)
3
3,256
54
380
57
-
114
114
New assets originated or purchased(4)
17,013
50
1,045
81
342
24
18,400
155
155
Net impact of further lending, payments and
other movements
(4,001)
(7)
(458)
(16)
333
9
(4,126)
(14)
(14)
Changes in risk parameters in relation to
credit quality
-
8
-
8
-
3
-
19
19
Redemptions
(12,667)
(24) (1,881)
(121)
(385)
(70)
(14,933)
(215)
(215)
Write-offs
-
-
-
-
(391)
(391)
(391)
(391)
-
Cash recoveries
-
-
-
-
-
84
-
84
-
Individually assessed impairment charge
-
-
-
-
-
370
-
370
370
Closing balance at 31 March 2025
62,088
119
8,350
406
1,369
214
71,807
739
429
26
Risk report (continued)
Credit risk (continued)
IFRS 9 staging (audited)(1)
12 months to 30 September 2023
(restated)
Stage 1
Stage 2
Stage 3(2)
Total
gross
loans
£m
Total
provisions
£m
Gross
loans
£m
ECL
£m
Gross
loans
£m
ECL
£m
Gross
loans
£m
ECL
£m
Income
statement
£m
Opening balance at 1 October 2022
66,385
85
5,725
268
1,036
104
73,146
457
Adjustment following change in accounting
policy(3)
(456)
-
-
-
-
-
(456)
-
Impact of other Nationwide presentational
adjustments(3)
(80)
-
73
-
7
-
-
-
Restated opening balance at 1 October
2022
65,849
85
5,798
268
1,043
104
72,690
457
Transfers from Stage 1 to Stage 2
(2,882)
(15)
2,882
15
-
-
-
-
-
Transfers from Stage 2 to Stage 1
1,685
56
(1,685)
(56)
-
-
-
-
-
Transfers to Stage 3
(210)
(1)
(198)
(18)
408
19
-
-
-
Transfers from Stage 3
97
1
71
2
(168)
(3)
-
-
-
Net remeasurement of ECL arising from
transfer of stage
-
(37)
-
187
-
20
-
170
170
Net movement
(1,310)
4
1,070
130
240
36
-
170
170
New assets originated or purchased(4)
14,015
33
637
58
77
18
14,729
109
109
Adjustment following change in accounting
policy(3)
18
-
-
-
-
-
18
-
-
Net impact of further lending, payments
and other movements
(2,406)
(17)
(204)
(9)
173
19
(2,437)
(7)
(7)
Changes in risk parameters in relation to
credit quality
-
(3)
-
8
-
1
-
6
6
Redemptions
(10,787)
(13)
(913)
(55)
(256)
(43)
(11,956)
(111)
(111)
Write-offs
-
-
-
-
(187)
(187)
(187)
(187)
-
Cash recoveries
-
-
-
-
-
38
-
38
-
Individually assessed impairment charge
-
-
-
-
-
142
-
142
142
Closing balance at 30 September 2023
(restated)
65,379
89
6,388
400
1,090
128
72,857
617
309
(1) The basis of preparation for this table has been updated. Previously, the table was presented on a gross basis, with the reported values representing an
aggregation of monthly movements over the period. To present more directly the change in credit quality the table is now prepared on a net basis.
(2) Stage 3 includes POCI for gross loans and advances of £34m for residential mortgages and £1m for Consumer lending (30 September 2023: £48m and £1m
respectively), and ECL of £Nil for residential mortgages and (£1m) for Consumer lending (30 September 2023: (£1m) and (£1m) respectively). Nil for
commercial lending in both periods.
(3) The prior year balances have been restated following the alignment of the Group’s accounting policies and presentation basis with Nationwide. Refer to note
1.7 for further details. In addition to the restatements set out in note 1.7, the apportionment of balances such as accrued interest and deferred and
unamortised fee income between stages has been aligned to Nationwide. This has not impacted the total gross loans and advances balance shown within
the table above.
(4) Includes assets where the term has ended, and a new facility has been provided.
The IFRS 9 staging movements are driven by a variety of factors at individual product portfolio levels, with further detail provided
in the following portfolio performance pages. Overall portfolio activity remains in line with expectations, with the net movements
across staging primarily affected by MES and the harmonisation of the IFRS calculator rather than underlying customer
movement.
The contractual amount outstanding on loans and advances that were written off during the reporting period and are still subject
to enforcement activity was £15.5m (30 September 2023: £5.1m). The increase relates to a small number of significant
exposures where a write off has been made, and the remaining balance is on the balance sheet and under collection activity,
with no further material loss expected, rather than any broad based portfolio deterioration. The Group has not purchased any
lending assets in the period (30 September 2023: none).
Further information on staging profile is provided at a portfolio level in the respective portfolio performance section on the
following pages.
27
Risk report (continued)
Credit risk (continued)
Residential mortgage credit performance
The table below presents key information on the asset quality of the Group’s Residential mortgage portfolio and should be read
in conjunction with the supplementary data presented in the following pages of this section.
Breakdown of Residential mortgage portfolio (audited)
Gross
lending
Modelled
& IA ECL
MA
Total ECL
Net
lending
Coverage
Average
LTV
31 March 2025
£m
£m
£m
£m
£m
%
%
Residential - capital repayment
34,236
18
7
25
34,211
0.07%
58.1%
Residential - interest only
6,909
11
4
15
6,894
0.22%
50.2%
Buy-to-let (BTL)
14,502
15
6
21
14,481
0.14%
56.2%
Total Residential mortgage
portfolio
55,647
44
17
61
55,586
0.11%
56.7%
30 September 2023 (restated)(1)
Residential - capital repayment
34,976
10
5
15
34,961
0.04%
54.2%
Residential - interest only
7,480
8
1
9
7,471
0.12%
47.0%
BTL
15,162
7
26
33
15,129
0.22%
52.8%
Total Residential mortgage
portfolio
57,618
25
32
57
57,561
0.10%
52.9%
(1)
The prior year balances have been restated following the alignment of the Group’s accounting policies and presentation basis with Nationwide. Refer to note
1.7 for further details
Residential mortgage lending has reduced on a net basis to £55.6bn (30 September 2023 (restated): £57.6bn) with a reduced
demand for new lending owing to the higher rate environment, stressed affordability pressures and wider cost of living
considerations, being outpaced by repayments and redemptions. The 6-month period to 31 March 2025, has seen some easing
of these pressure points with base rate and stressed affordability improving.
The portfolio continues to evidence solid underlying credit performance, with the majority (98%) of lending not yet past due at
the balance sheet date (30 September 2023 (restated): 99%), and 89% of loans held in Stage 1 (30 September 2023 restated:
94%). Whilst Residential mortgage arrears remain below industry levels, they have increased over the 18 month period to 31
March 2025, primarily driven by interest rate shocks which disproportionately affected customers with residential interest-only,
high-value loans and customers on variable rates, although this has eased over the 6 month period to March 2025. The
harmonisation of the IFRS 9 calculator has driven the migration of loans from Stage 1 to Stage 2 not past due, rather than
underlying customer deterioration. The proportion of the portfolio rated Strong or Good at the balance sheet date under the
Group’s internal PD rating scale remains high at 97% (30 September 2023(restated): 93%), and the volume of loans in
forbearance has reduced to 3,539/£517m from 3,801/£498m, primarily due to customers successfully completing the
forbearance reporting probation period and returning to fully performing status.
Stage 3 balances have remained low at 1.0% (30 September 2023: 1.0%) and 89% of the portfolio has an LTV of less than 80%
(30 September 2023: 95%), with the weighted average LTV up slightly through the period at 56.7% (30 September 2023: 52.9%)
primarily due to repayments and redemptions from the less than 60% LTV portfolio, which reduced to 54% of the total portfolio
(30 September 2023: 64%). Further detail on LTV bandings and forbearance measures is provided on the following pages.
Residential mortgage portfolio – interest rate profile (audited)
31 March 2025
30 September 2023 (restated)(1)
£m
%
£m
%
Fixed rate
51,208
92.1%
52,678
91.5%
Variable rate
2,861
5.1%
3,071
5.3%
Standard variable rate (SVR)
1,578
2.8%
1,869
3.2%
Total
55,647
100%
57,618
100.0%
(1)
The prior year balances have been restated following the alignment of the Group’s accounting policies and presentation basis with Nationwide. Refer to note
1.7 for further details
The Group is a signatory to the Mortgage Charter introduced by the Government to support mortgage customers impacted by
higher mortgage interest rates and provide help and support to those who are in financial difficulty. This provides an option for
borrowers who are up to date on their mortgage payments to switch to interest only payments for a six-month period. To date
the number of customers requiring this support has been low.
28
Risk report (continued)
Credit risk (continued)
Collateral
The quality of the Group’s Residential mortgage portfolio can be considered in terms of the average LTV of the portfolio and the
staging of the portfolio, as set out in the following tables:
Average LTV of Residential mortgage portfolio by staging (audited)
31 March 2025
Stage 1
Stage 2
Stage 3(2)
Total
LTV(1)
Loans
£m
%
ECL
£m
Loans
£m
%
ECL
£m
Loans
£m
%
ECL
£m
Loans
£m
%
ECL
£m
Up to 50%
16,942
35
1
3,002
58
3
239
43
4
20,183
35
8
50% to 60%
9,572
19
1
922
17
3
99
18
1
10,593
19
5
60% to 70%
10,047
20
2
723
14
7
87
15
3
10,857
20
12
70% to 80%
7,666
15
2
395
7
6
58
10
3
8,119
15
11
80% to 90%
4,157
8
2
171
3
4
33
6
3
4,361
8
9
90% to 100%
1,388
3
1
67
1
2
22
4
3
1,477
3
6
Over 100%
21
-
1
12
-
1
24
4
8
57
-
10
49,793
100
10
5,292
100
26
562
100
25
55,647
100
61
30 September 2023
(restated)(3)
Stage 1
Stage 2
Stage 3(2)
Total
LTV(1)
Loans
£m
%
ECL
£m
Loans
£m
%
ECL
£m
Loans
£m
%
ECL
£m
Loans
£m
%
ECL
£m
Up to 50%
22,596
42%
4
1,588
58%
4
286
51%
3 24,470
43%
11
50% to 60%
11,715
22%
2
505
18%
4
99
18%
2 12,319
21%
8
60% to 70%
10,878
20%
3
396
14%
7
74
13%
3 11,348
20%
13
70% to 80%
6,462
12%
2
213
8%
5
53
9%
3
6,728
12%
10
80% to 90%
2,375
4%
1
56
2%
2
21
4%
3
2,452
4%
6
90% to 100%
243
-
-
6
-
1
14
3%
2
263
-
3
Over 100%
26
-
1
2
-
4
10
2%
1
38
-
6
54,295
100%
13
2,766
100%
27
557
100%
17 57,618
100%
57
(1)
LTV of the Residential mortgage portfolio is defined as Residential mortgage portfolio weighted by balance. The portfolio is indexed using the MIAC
Acadametrics indices at a given date.
(2)
Stage 3 includes £34m (30 September 2023: £48m) of POCI gross loans and advances and £Nil ECL (30 September 2023: (£1m)).
(3)
The prior year balances have been restated following the alignment of the Group’s accounting policies and presentation basis with Nationwide. Refer to note
1.7 for further details. In addition to the restatements set out in note 1.7, the apportionment of balances such as accrued interest and deferred and
unamortised fee income between stages has been aligned to Nationwide. This has not impacted the total gross loans and advances balance shown within
the table above.
The Residential mortgage portfolio remains highly secured with the majority of the portfolio less than 70% LTV. The change in
profile since 30 September 2023 has been driven by repayments and redemptions of loans in the lower LTV ranges, updates to
the LTV indices, and a continuation of a policy to support first time buyers to get onto the market.
29
Risk report (continued)
Credit risk (continued)
Residential mortgage credit performance (continued)
Forbearance (audited)
A key indicator of underlying Residential mortgage portfolio health is the level of loans subject to forbearance measures.
Forbearance can occur when a customer experiences financial difficulty. In such circumstances, the Group considers the
customer’s individual circumstances, uses judgement in assessing whether they are in, or approaching financial difficulty, or if
an impairment or default event has occurred, and then applies tailored forbearance measures in order to support the customer
in a route to stability. Customers may potentially be subject to more than one forbearance strategy at any one time where this is
considered to be the most appropriate course of action.
The table below summarises the level of forbearance in respect of the Group’s Residential mortgage portfolio at each balance
sheet date.
31 March 2025
Total loans and advances
subject to forbearance measures
Impairment allowance
on loans and advances
subject to forbearance measures
Number of
loans
Gross carrying
amount
£m
% of total
portfolio
Impairment
allowance
£m
Coverage
%
Total Residential mortgage forbearance
3,539
517
0.93%
15.8
3.05%
30 September 2023
Total Residential mortgage forbearance
3,801
498
0.87%
12.2
2.44%
As at 31 March 2025, forbearance totalled £517m (3,539 loans), from the 30 September 2023 position of £498m (3,801 loans).
This level represents 0.93% of total mortgage balances (2023: 0.87%), with the decrease in volume primarily driven by
customers successfully completing the forbearance reporting probation period and returning to fully performing status.
When all other avenues of resolution, including forbearance, have been explored, the Group will take steps to repossess and
sell underlying collateral. In the 18 month period to 31 March 2025, there were 125 repossessions of which 3 were voluntary (12
months to 30 September 2023: 55 including 4 voluntary). The increase in Repossessions is in line with expectations following
the lifting of COVID-related restrictions, which had previously delayed enforcement activity. The increase also reflects the
clearing of backlogs in court scheduling and the availability of bailiffs to execute warrants. The Group remains committed to
supporting the customer and places good customer outcomes at the centre of this strategy.
30
Risk report (continued)
Credit risk (continued)
Residential mortgage credit performance (continued)
IFRS 9 staging (audited)(1)
The Group closely monitors the staging profile of the Residential mortgage portfolio over time, which can be indicative of general
trends in book health. Movements in the staging profile of the portfolio are presented in the tables below.
Stage 1
Stage 2
Stage 3(2)
18 months to 31 March 2025
Gross
loans
£m
ECL
£m
Gross
loans
£m
ECL
£m
Gross
loans
£m
ECL
£m
Total
gross
loans
£m
Total
provisions
£m
Income
statement
£m
Restated opening balance at 1 October
2023(3)
54,295
13
2,766
27
557
17
57,618
57
Transfers from Stage 1 to Stage 2
(3,630)
(1)
3,630
1
-
-
-
-
-
Transfers from Stage 2 to Stage 1
644
6
(644)
(6)
-
-
-
-
-
Transfers to Stage 3
(147)
-
(125)
(2)
272
2
-
-
-
Transfers from Stage 3
49
-
54
1
(103)
(1)
-
-
-
Net remeasurement of ECL arising from
transfer of stage
-
(5)
-
20
-
(3)
-
12
12
Net movement
(3,084)
-
2,915
14
169
(2)
-
12
12
New assets originated or purchased(4)
10,312
2
321
4
7
-
10,640
6
6
Net impact of further lending, repayments
and other movements
(2,303)
(2)
(301)
(8)
(10)
9
(2,614)
(1)
(1)
Changes in risk parameters in relation to
credit quality
-
(1)
-
(8)
-
10
-
1
1
Redemptions
(9,427)
(2)
(409)
(3)
(157)
(4)
(9,993)
(9)
(9)
Write-offs
-
-
-
-
(4)
(4)
(4)
(4)
-
Individually assessed impairment charge
-
-
-
-
-
(1)
-
(1)
(1)
Closing balance at 31 March 2025
49,793
10
5,292
26
562
25
55,647
61
8
of which:
Residential - capital repayment
31,190
5
2,779
13
267
7
34,236
25
Residential - interest only
5,628
2
1,098
4
183
9
6,909
15
BTL
12,975
3
1,415
9
112
9
14,502
21
31
Risk report (continued)
Credit risk (continued)
Residential mortgage credit performance (continued)
IFRS 9 staging (audited)(1)
Stage 1
Stage 2
Stage 3(2)
12 months to 30 September 2023
(restated)
Gross
loans
£m
ECL
£m
Gross
loans
£m
ECL
£m
Gross
loans
£m
ECL
£m
Total
gross
loans
£m
Total
provisions
£m
Income
statement
£m
Opening balance at 1 October 2022
54,791
10
3,090
32
583
14
58,464
56
Adjustment following change in
accounting policy(3)
(171)
-
-
-
-
-
(171)
-
Impact of other Nationwide
presentational alignments(3)
(106)
-
101
-
5
-
-
-
Restated opening balance at 1 October
2022
54,514
10
3,191
32
588
14
58,293
56
Transfers from Stage 1 to Stage 2
(1,341)
-
1,341
-
-
-
-
-
Transfers from Stage 2 to Stage 1
1,311
13 (1,311)
(13)
-
-
-
-
Transfers to Stage 3
(110)
-
(104)
(4)
214
4
-
-
Transfers from Stage 3
93
-
50
1
(143)
(1)
-
-
Net remeasurement of ECL arising from
transfer of stage
-
(15)
-
18
-
-
-
3
3
Net movement
(47)
(2)
(24)
2
71
3
-
3
3
Adjustment following change in
accounting policy(3)
(8)
-
-
-
-
-
(8)
-
-
New assets originated or purchased(4)
9,286
2
105
1
1
-
9,392
3
3
Net impact of further lending and
repayments
(1,236)
2
(127)
(3)
(3)
1
(1,366)
-
-
Changes in risk parameters in relation to
credit quality
-
2
-
(2)
-
2
-
2
2
Redemptions
(8,214)
(1)
(379)
(3)
(99)
(2)
(8,692)
(6)
(6)
Write-offs
-
-
-
-
(1)
(1)
(1)
(1)
-
Individually assessed impairment charge
-
-
-
-
-
-
-
-
-
Closing balance at 30 September 2023
54,295
13
2,766
27
557
17
57,618
57
2
of which:
Residential - capital repayment
33,179
3
1,525
6
272
6
34,976
15
Residential - interest only
6,618
1
667
2
195
6
7,480
9
BTL
14,498
9
574
19
90
5
15,162
33
(1) The basis of preparation for this table has been updated. Previously, the table was presented on a gross basis, with the reported values representing an
aggregation of monthly movements over the period. To present more directly the change in credit quality the table is now prepared on a net basis.
(2) Stage 3 includes POCI for gross loans and advances of £34m and ECL of £Nil (30 September 2023: £48m and (£1m) respectively).
(3) The prior year balances have been restated following the alignment of the Group’s accounting policies and presentation basis with Nationwide. Refer to note 1.7
for further details. In addition to the restatements set out in note 1.7, the apportionment of balances such as accrued interest and deferred and unamortised fee
income between stages has been aligned to Nationwide. This has not impacted the total gross loans and advances balance shown within the table above.
(4) Includes assets where the term has ended, and a new facility has been provided.
The Residential mortgage portfolio continues to evidence strong performance, and whilst the levels of arrears has increased
over the 18 month period to 31 March 2025, this has eased over the 6 month period to March 2025 and the levels of late stage
arrears, impairment and write off remain relatively low.
The level of Residential mortgage lending classed as Stage 1 decreased from 94.2% at 30 September 2023 to 89.5% primarily
due to the harmonisation of the IFRS 9 calculator rather than any underlying customer deterioration. As a result, the assets in
Stage 2 increased from 4.8% to 9.5% with 94%, not past due at the balance sheet date (30 September 2023: 89%). The
proportion of mortgages classified as Stage 3 remains modest at 1.0% (30 September 2023: 1.0%). The net movements across
the stages are driven by a wide variety of factors with the impact of the harmonisation the primary one.
Residential mortgage lending classed as ‘Strong’ has increased to 94.2% from 93.3% at 30 September 2023, with over 97% (30
September 2023 (restated): 98%) of the Residential mortgage portfolio classed as ‘Good’ or ‘Strong.’ The sustained quality in
the internal PD ratings and high quality of collateral underpinning the book are key factors supporting the provision coverage of
11bps (30 September 2023: 10bps).
32
Risk report (continued)
Credit risk (continued)
Consumer lending credit performance
The table below presents key information important for understanding the asset quality of the Group’s Consumer lending
portfolio and should be read in conjunction with the supplementary data presented in the following pages of this section.
Breakdown of Consumer lending portfolio (audited)
Gross
lending
Modelled &
IA ECL
PMA
Total ECL
Net lending
Coverage
31 March 2025
£m
£m
£m
£m
£m
%
Credit cards
6,162
428
36
464
5,698
7.53%
Personal loans
467
51
1
52
415
11.13%
Overdrawn current accounts
27
3
-
3
24
11.11%
Total Consumer lending portfolio
6,656
482
37
519
6,137
7.80%
30 September 2023 (restated)(1)
Credit cards
5,829
364
28
392
5,437
6.72%
Personal loans
699
32
1
33
666
4.72%
Overdrawn current accounts
27
4
-
4
23
14.81%
Total Consumer lending portfolio
6,555
400
29
429
6,126
6.53%
(1)
The prior year balances have been restated following the alignment of the Group’s accounting policies and presentation basis with Nationwide. Refer to note 1.7
for further details.
Gross Consumer lending balances increased to £6.7bn (30 September 2023 (restated): £6.6bn) with modest underlying growth
in the credit card portfolio partially offset by repayments in the personal loan portfolio.
The overall credit quality of the Consumer lending portfolio is stable with credit cards the predominant portfolio. In the 18 months
ended 31 March 2025, portfolio arrears have gradually improved and stabilised. Appetite for growth into higher risk segments
has reduced over the period, with Group ceasing Slyce and some higher risk pricing bands from October 2024. The proportion
of the Consumer lending portfolio classed as Stage 1 or Stage 2 not past due is 94% (30 September 2023: 97%), with 87% of
the portfolio rated Strong or Good at the balance sheet date under the Group’s internal PD rating scale (30 September 2023
(restated): 91%).
Stage 3 balances have increased to 5.3% (30 September 2023: 1.7%). Following a strategic review of Salary Finance Loans
Limited (Salary Finance), the joint venture (JV) will no longer be a core part of the go-forward strategy. A combination of the JV’s
historic trading losses and the decision to not extend any additional lending to the JV beyond end 2025 meant that the lending
met the conditions to be classed as Stage 3. See note 5.3 for further details.
The value of Consumer lending written off in the 18 month period, net of recoveries, was £303m (12 months to 30 September
2023: £124m), with the increase commensurate with a continued growth in the credit card portfolio between 2019 and 2025 and
an expansion into higher risk segments. The cost of risk for the 18 month period is 347bps (12 months to 30 September 2023:
430bps).
The overall impact of the above to the ECL held for the Consumer lending portfolio has been an increase of £90m to £519m (30
September 2023: £429m). ECL Harmonisation activity accounts for £84m of this increase, with the alignment of the severe
downside scenarios to stress outcomes contributing the most material impact.
Overall, coverage increased to 780bps (30 September 2023: 654bps).
Forbearance (audited)
The table below summarises the level of forbearance in respect of the Group’s Consumer lending portfolios at each balance
sheet date. All balances subject to forbearance are classed as either Stage 2 or Stage 3 for ECL purposes.
Total loans and advances
subject to forbearance measures
Impairment allowance
on loans and advances
subject to forbearance measures
31 March 2025
Number of
loans
Gross carrying
amount
£m
% of total
portfolio
Impairment
allowance
£m
Coverage
%
Total Consumer lending forbearance
33,782
131
2.05%
59.3
45.13%
30 September 2023
Total Consumer lending forbearance
22,697
92
1.42%
42.5
46.00%
33
Risk report (continued)
Credit risk (continued)
Consumer lending credit performance (continued)
The volume and value of forbearance has increased from 22,697/£92m at 30 September 2023 to 33,782/£131m at 31 March
2025, notably on the credit card portfolio, due to portfolio maturation and expansion into higher risk segments. The Group looks
to agree concessions and payment arrangements which are in the best interest of the customers, in order to maximise their
ability to repay the lending and return to fully performing status. Forbearance on the loan and overdrafts remain modest and in
line with the reducing size of the portfolios.
IFRS 9 staging (audited)(1)
The Group closely monitors the staging profile of its Consumer lending portfolio over time, which can be indicative of general
trends in book health. Movements in the staging profile of the portfolio are presented in the tables below.
Stage 1
Stage 2
Stage 3(2)
Total
provisions
£m
Income
statement
£m
18 months to 31 March 2025
Gross
loans
£m
ECL
£m
Gross
loans
£m
ECL
£m
Gross
loans
£m
ECL
£m
Total
gross
loans
£m
Restated opening balance at 1
October 2023(3)
4,849
46
1,595
322
111
61
6,555
429
Transfers from Stage 1 to Stage 2
(539)
(7)
539
7
-
-
-
-
-
Transfers from Stage 2 to Stage 1
507
98
(507)
(98)
-
-
-
-
-
Transfers to Stage 3
(38)
(1)
(62)
(22)
100
23
-
-
-
Transfers from Stage 3
-
-
-
-
-
-
-
-
-
Net remeasurement of ECL arising from
transfer of stage
-
(91)
-
137
-
30
-
76
76
Net movement
(70)
(1)
(30)
24
100
53
-
76
76
New assets originated or purchased(4)
1,957
26
254
62
231
11
2,442
99
99
Net impact of further lending,
repayments and other movements
(1,101)
1
66
(3)
337
4
(698)
2
2
Changes in risk parameters in relation
to credit quality
-
11
-
16
-
(5)
-
22
22
Redemptions
(651)
(7)
(568)
(96)
(83)
(49)
(1,302)
(152)
(152)
Write-offs
-
-
-
-
(341)
(341)
(341)
(341)
-
Cash recoveries
-
-
-
-
-
81
-
81
-
Individually assessed impairment
charge
-
-
-
-
-
303
-
303
303
Closing balance at 31 March 2025
4,984
76
1,317
325
355
118
6,656
519
350
34
Risk report (continued)
Credit risk (continued)
Consumer lending credit performance (continued)
IFRS 9 staging (audited)(1)
12 months to 30 September 2023
Stage 1
Stage 2
Stage 3(2)
Total
provisions
£m
Gross
loans
£m
ECL
£m
Gross
loans
£m
ECL
£m
Gross
loans
£m
ECL
£m
Total
gross
loans
£m
Income
statement
£m
Opening balance at 1 October 2022
5,324
63
1,109
181
80
40
6,513
284
Adjustment following change in
accounting policy(3)
(285)
-
-
-
-
-
(285)
-
Impact of other Nationwide
presentational alignments (3)
61
-
(56)
-
(5)
-
-
-
-
Restated opening balance at 1
October 2022
5,100
63
1,053
181
75
40
6,228
284
-
Transfers from Stage 1 to Stage 2
(627)
(13)
627
13
-
-
-
-
-
Transfers from Stage 2 to Stage 1
208
39
(208)
(39)
-
-
-
-
-
Transfers to Stage 3
(34)
(1)
(42)
(12)
76
13
-
-
-
Transfers from Stage 3
-
-
-
-
-
-
-
-
-
Net remeasurement of ECL arising
from transfer of stage
-
(14)
-
145
-
19
-
150
150
Net movement
(453)
11
377
107
76
32
-
150
150
Adjustment following change in
accounting policy(3)
26
-
-
-
-
-
26
-
-
New assets originated or purchased(4)
1,382
12
195
41
9
6
1,586
59
59
Net impact of further lending,
repayments and other movements
(735)
(24)
83
10
163
16
(489)
2
2
Changes in risk parameters in relation
to credit quality
-
(10)
-
17
-
(3)
-
4
4
Redemptions
(471)
(6)
(113)
(34)
(51)
(30)
(635)
(70)
(70)
Write-offs
-
-
-
-
(161)
(161)
(161)
(161)
-
Cash recoveries
-
-
-
-
-
37
-
37
-
Individually assessed impairment
charge
-
-
-
-
-
124
-
124
124
Closing balance at 30 September 2023 4,849
46
1,595
322
111
61
6,555
429
269
(1) The basis of preparation for this table has been updated. Previously, the table was presented on a gross basis, with the reported values representing an
aggregation of monthly movements over the period. To present more directly the change in credit quality the table is now prepared on a net basis.
(2) Stage 3 includes POCI for gross loans and advances of £1m and ECL of (£1m) (30 September 2023: £1m and (£2m) respectively).
(3) The prior year balances have been restated following the alignment of the Group’s accounting policies and presentation basis with Nationwide. Refer to note 1.7
for further details. In addition to the restatements set out in note 1.7, the apportionment of balances such as accrued interest and deferred and unamortised fee
income between stages has been aligned to Nationwide. This has not impacted the total gross loans and advances balance shown within the table above.
(4) Includes assets where the term has ended, and a new facility has been provided.
The assets classed as Stage 1 have remained relatively stable at 74.9% (30 September 2023: 74.2%). The assets in Stage 2
have reduced from 24.3% to 19.8% primarily due to the Salary Finance JV which has moved to Stage 3. Within the Stage 2
category, 95.5% is not past due (30 September 2023: 95.4%). The proportion classified as Stage 3 increased to 5.3% (30
September 2023: 1.7%) due to the movement above.
The level of write offs in the Consumer lending portfolio has increased, commensurate with a portfolio which has grown into
higher risk segments. The level of write offs in the Consumer lending portfolio has increased and the value of fraud losses has
increased from £6m in the 12 month period to 30 September 2023, to £16m in the 18 month period to 31 March 2025 due
primarily to portfolio maturation and expansion into higher risk segments. The total ECL held on balance sheet has increased
from £429m at 30 September 2023 to £519m at 31 March 2025 with the harmonisation of the IFRS 9 calculator being the
primary driver.
The total Consumer lending impairment charge in the period is £350m (12 months to 30 September 2023: £269m), which is net
of an individually assessed charge of £303m (12 months to 30 September 2023: £124m). The associated CoR is 347bps (12
months to 30 September 2023: 430bps).
The total provision coverage has increased to 780bps (30 September 2023: 654bps).
35
Risk report (continued)
Credit risk (continued)
Business and commercial lending credit performance
The table below presents key information on the asset quality of the Group’s Business and consumer lending portfolio and
should be read in conjunction with the supplementary data presented in the following pages of this section.
Breakdown of Business and commercial lending portfolio (audited)
Gross
lending
Model-
led & IA
ECL
MA
Total
ECL
Net
lending
Cover-
age
31 March 2025
£m
£m
£m
£m
£m
%
Agriculture
1,253
5
1
6
1,247
0.48%
Business services
1,293
37
6
43
1,250
3.33%
Commercial Real Estate
666
4
-
4
662
0.60%
Government, health & education
1,604
13
2
15
1,589
0.94%
Hospitality
1,026
3
1
4
1,022
0.39%
Manufacturing
662
16
5
21
641
3.17%
Resources
170
1
1
2
168
1.18%
Residential social landlords
256
-
-
-
256
-
Retail and wholesale trade
883
28
4
32
851
3.62%
Transport and storage
393
5
-
5
388
1.27%
Utilities, post and telecoms
581
7
1
8
573
1.38%
Other
717
16
3
19
698
2.65%
Total Business and commercial lending portfolio
9,504
135
24
159
9,345
1.67%
30 September 2023
Agriculture
1,361
4
1
5
1,356
0.37%
Business services
1,365
38
3
41
1,324
3.00%
Commercial Real Estate
543
5
1
6
537
1.10%
Government, health & education
1,238
9
2
11
1,227
0.89%
Hospitality
839
3
1
4
835
0.48%
Manufacturing
746
17
3
20
726
2.68%
Resources
165
2
-
2
163
1.21%
Residential social landlords
176
-
-
-
176
-
Retail and wholesale trade
903
19
2
21
882
2.33%
Transport and storage
322
4
-
4
318
1.24%
Utilities, post and telecoms
387
4
1
5
382
1.29%
Other
639
11
1
12
627
1.88%
Total Business and commercial lending portfolio
8,684
116
15
131
8,553
1.51%
36
Risk report (continued)
Credit risk (continued)
Business and commercial lending credit performance (continued)
Gross Business and commercial lending increased to £9.5bn (30 September 2023: £8.7bn). Growth remains targeted to sectors
and sub sectors where we have well established expertise. The sector mix remained relatively stable with lending to the
agriculture, business services and government, health and education sectors continuing to account for almost half of the total
book, at 44% (30 September 2023: 46%). The government-guaranteed lending portfolio continues to reduce as borrowers repay
balances and is now £0.5bn (30 September 2023: £0.8bn).
There has been no significant deterioration in asset quality metrics across the portfolio although a small number of significant
individually assessed provisions have been raised. A range of external risks have remained prevalent throughout the period
including general inflationary pressures, higher rate environment, governmental fiscal policy changes, as well as wider
geopolitical risks.
The proportion of loans in Stage 1 has increased to 77.0% (30 September 2023 (restated): 71.8%) with a corresponding
decrease in the proportion of loans in Stage 2 at 18.3% (30 September 2023 (restated): 23.3%). Within the Stage 2 category,
98.9% is not past due (30 September 2023: 98.5%) and 94% rated as ‘Strong’ or ‘Good’ (30 September 2023: 90%) under the
Group’s internal PD rating scale. Stage 3 loans remain modest at 4.8% (30 September 2023 (restated): 4.9%).
Forbearance (audited)
Forbearance is considered to exist where customers are experiencing, or are about to experience financial difficulty, and the
Group grants a concession on a non-commercial basis. The Group reports business and commercial forbearance at a customer
level and at a value which incorporates all facilities and the related impairment allowance, irrespective of whether each
individual facility is subject to forbearance. Authority to grant forbearance measures for business and commercial customers is
held by the Group’s Strategic Business Services unit and is exercised, where appropriate, based on detailed consideration of
the customer’s financial position and prospects.
Where a customer is part of a larger group, forbearance is exercised and reported across the Group at the individual entity level.
Where modification of the terms and conditions of an exposure meeting the criteria for classification as forbearance results in
derecognition of loans and advances from the balance sheet and the recognition of a new exposure, the new exposure will be
treated as forborne.
The tables below summarise the total number of arrangements in place and the loan balances and impairment provisions
associated with those arrangements. All balances subject to forbearance are classed as either Stage 2 or Stage 3 for ECL
purposes.
31 March 2025
Total loans and advances
subject to forbearance measures
Impairment allowance
on loans and advances
subject to forbearance measures
Number of
loans
Gross carrying
amount
£m
% of total
portfolio
Impairment
allowance
£m
Coverage
%
Total Business and commercial forbearance
283
481
4.82%
65
13.47%
30 September 2023
Total Business and commercial forbearance
291
493
5.35%
45
9.14%
The number of Business and commercial customers reported in receipt of forbearance concessions has remained relatively
stable at 283 (30 September 2023: 291) with the total customer lending reducing to £481m (30 September 2023: £493m). Whilst
the forbearance concession may only be applied to one account in the customer’s portfolio, in the disclosure above, the
customer’s full lending portfolio is included. Forbearance remains a key support measure for customers in, or about to,
experience financial difficulty, and the ability to agree a temporary concession on a non-commercial basis can often be the
critical breathing room required to support a return to fully performing status. As a percentage of the Business and commercial
portfolio, forborne balances have reduced to 4.82% (30 September 2023: 5.35%) with impairment coverage increasing to
13.47% (30 September 2023: 9.14%).
The table includes a portfolio of financial assets at fair value. The gross value of fair value loans subject to forbearance is £0.3m
(30 September 2023: £0.5m), now representing less than 0.01% of the total business portfolio (30 September 2023: 0.01%).
The credit risk adjustment on these amounts is immaterial.
37
Risk report (continued)
Credit risk (continued)
Business and commercial lending credit performance (continued)
IFRS 9 staging (audited)(1)
The Group closely monitors the staging profile of its Business and commercial lending portfolio over time, which can be
indicative of general trends in book health. Movements in the staging profile of the portfolio in the current and prior year are
presented in the tables below.
Stage 1
Stage 2
Stage 3(3)
Income
statement
£m
18 months to 31 March 2025(2)
Gross
loans
£m
ECL
£m
Gross
loans
£m
ECL
£m
Gross
loans
£m
ECL
£m
Total
gross
loans
£m
Total
provisions(1)
£m
Opening balance at 1 October 2023(4)
6,235
30
2,027
51
422
50
8,684
131
Transfers from Stage 1 to Stage 2
(701)
(3)
701
3
-
-
-
-
-
Transfers from Stage 2 to Stage 1
282
8
(282)
(8)
-
-
-
-
-
Transfers to Stage 3
(73)
(1)
(78)
(2)
151
3
-
-
-
Transfers from Stage 3
10
1
30
3
(40)
(4)
-
-
-
Net remeasurement of ECL arising from
transfer of stage
-
(1)
-
20
-
7
-
26
26
Net movement
(482)
4
371
16
111
6
-
26
26
New assets originated or purchased(5)
4,744
22
470
15
103
13
5,317
50
50
Net impact of further lending, repayments
and other movements
(596)
(6)
(223)
(6)
5
(4)
(814)
(16)
(16)
Changes in risk parameters in relation to
credit quality
-
(3)
-
1
-
(2)
-
(4)
(4)
Redemptions
(2,590)
(14)
(904)
(22)
(144)
(17)
(3,638)
(53)
(53)
Write-offs
-
-
-
-
(45)
(45)
(45)
(45)
-
Cash recoveries
-
-
-
-
-
2
-
2
-
Individually assessed impairment charge
-
-
-
-
-
68
-
68
68
Closing balance at 31 March 2025
7,311
33
1,741
55
452
71
9,504
159
71
38
Risk report (continued)
Credit risk (continued)
Business and commercial lending credit performance (continued)
IFRS 9 staging (audited)(1)
12 months to 30 September 2023(2)
Stage 1
Stage 2
Stage 3(3)
Gross
loans
£m
ECL
£m
Gross
loans
£m
ECL
£m
Gross
loans
£m
ECL
£m
Total
gross
loans
£m
Total
provisions
£m
Income
statement
£m
Opening balance at 1 October 2022
6,270
12
1,526
55
373
50
8,169
117
Impact of other Nationwide
presentational alignments (4)
(35)
-
28
-
7
-
-
-
Restated opening balance at 1 October
2022
6,235
12
1,554
55
380
50
8,169
117
Transfers from Stage 1 to Stage 2
(914)
(2)
914
2
-
-
-
-
-
Transfers from Stage 2 to Stage 1
167
5
(167)
(5)
-
-
-
-
-
Transfers to Stage 3
(65)
-
(52)
(2)
117
2
-
-
-
Transfers from Stage 3
2
-
21
1
(23)
(1)
-
-
-
Net remeasurement of ECL arising from
transfer of stage
-
(8)
-
23
-
1
-
16
16
Net movement
(810)
(5)
716
19
94
2
-
16
16
New assets originated or purchased (5)
3,346
18
337
16
67
12
3,750
46
46
Net impact of further lending, repayments
and other movements
(434)
4
(159)
(13)
12
1
(581)
(8)
(8)
Changes in risk parameters in relation to
credit quality
-
5
-
(6)
-
2
-
1
1
Redemptions
(2,102)
(4)
(421)
(20)
(106)
(11)
(2,629)
(35)
(35)
Write-offs
-
-
-
-
(25)
(25)
(25)
(25)
-
Cash recoveries
-
-
-
-
-
1
-
1
-
Individually assessed impairment charge
-
-
-
-
-
18
-
18
18
Closing balance at 30 September 2023
6,235
30
2,027
51
422
50
8,684
131
38
(1)
The basis of preparation for this table has been updated. Previously, the table was presented on a gross basis, with the reported values representing an
aggregation of monthly movements over the period. To present more directly the change in credit quality the table is now prepared on a net basis.
(2)
Excludes £202m (30 September 2023: £143m) of guarantee claim funds received from British Business Bank.
(3)
Stage 3 includes POCI for gross loans and advances of £1m and ECL of (£1m) (30 September 2023: £1m and (£2m) respectively).
(4)
The prior year balances have been restated following the alignment of the Group’s accounting policies and presentation basis with Nationwide. Refer to note 1.7
for further details. In addition to the restatements set out in note 1.7, the apportionment of balances such as accrued interest and deferred and unamortised fee
income between stages has been aligned to Nationwide. This has not impacted the total gross loans and advances balance shown within the table above.
(5)
Includes assets where the term has ended, and a new facility has been provided.
The level of Business and commercial lending classed as Stage 1 has increased to 77.0% (30 September 2023 (restated):
71.8%), with a corresponding decrease in Stage 2 to 18.3% (30 September 2023 (restated): 23.3%), primarily driven by new
lending, improved economic outlooks and updates to the MES inputs over the period.
The majority (98.9%) of the portfolio in Stage 2 is not past due and is primarily in this category due to PD deterioration in
addition to proactive management measures such as early intervention, heightened monitoring, and forbearance concessions.
Stage 3 loans have remained relatively stable at 4.8% (30 September 2023: 4.7%) and are predominantly fully secured Bounce
Back Loans.
The level of write offs have increased over the 18 months to 31 March 2025, and the individually assessed charge has
increased to £68m (12 months to 30 September 2023: £18m) with a small number of individually assessed provisions raised
and written off, rather than a broader deterioration in the portfolio or particular sectors.
The proportion of assets classed as ‘Strong’ has increased slightly to 27% (30 September 2023: 23%) and the proportion
classed as ‘Strong’ or ‘Good’ remains robust at 94% (30 September 2023: 90%).
39
Risk report (continued)
Credit risk (continued)
Business and commercial collateral (audited)
The following table shows collateral held at 31 March 2025. The exposure amount shown is net of credit provisions that have
some form of associated collateral and is not the total exposure for each asset class as this is disclosed elsewhere in the credit
risk report.
31 March 2025
Property
£m
Cash
£m
Guarantee
£m
Netting
£m
Debt
securities
£m
Other
physical
collateral
£m
Receivables
£m
Total
£m
Exposure
£m
Financial assets at amortised cost
Loans and advances to customers
5,729
5
829
159
-
715
292
7,729
8,464
Of which: Defaulted
74
-
228
1
-
1
4
308
312
30 September 2023
Property
£m
Cash
£m
Guarantee
£m
Netting
£m
Debt
securities
£m
Other
physical
collateral
£m
Receivables
£m
Total
£m
Exposure
£m
Financial assets at amortised cost
Loans and advances to customers
5,072
11
760
169
-
567
334
6,913
7,514
Of which: Defaulted
61
-
182
-
-
-
17
260
267
Other credit risks
Offsetting of financial assets and liabilities (audited)
The table below presents information on recognised financial assets and financial liabilities that are offset on the balance sheet
under IAS 32, as well as those that are subject to master netting or similar arrangements, irrespective of whether they are offset.
The Group reduces exposure to credit risk through central clearing for eligible derivatives, and daily posting of cash collateral on
such transactions as detailed in note 3.1.3.1 to the financial statements. The amounts offset on the balance sheet, as shown
below, mainly represent derivatives and variation margin collateral with central clearing houses, which meet the criteria for
offsetting under IAS 32.
The Group enters into derivatives and repurchase agreements with various counterparties, which are governed by industry-
standard master netting agreements. The Group holds and provides collateral in respect of transactions covered by these
agreements. The right to offset balances under these master netting agreements only arises in the event of non-payment or
default and, as a result, these arrangements do not qualify for offsetting under IAS 32.
40
Risk report (continued)
Credit risk (continued)
Other credit risks (continued)
Collateral amounts included in the table below are limited to the net balance sheet exposure in order to exclude any over
collateralisation. The table excludes financial instruments not subject to offset and that are formally subject to collateral
arrangements (for example loans and advances). The net amounts presented in the table are not intended to represent the
Group’s exposure to credit risk, as the Group will use a wide range of strategies to mitigate credit risk in addition to netting
and collateral.
31 March 2025
Offsetting recognised on the
balance sheet under IAS 32
Netting potential not recognised
on the balance sheet
Gross
amounts
before offset
£m
Amounts
offset on
balance sheet
£m
Net amounts
presented on
balance sheet
£m
Subject to
master netting
agreements
£m
Cash collateral
pledged/
received(2)
£m
Net
amount
£m
Derivative assets
1,069
(1,021)
48
(7)
(3)
38
Derivative liabilities
(990)
858
(132)
7
35
(90)
Net position(1)
79
(163)
(84)
-
32
(52)
Repurchase agreements
(10)
-
(10)
10
-
-
30 September 2023
Derivative assets
2,606
(2,471)
135
(26)
(81)
28
Derivative liabilities
(1,643)
1,353
(290)
26
62
(202)
Net position(1)
963
(1,118)
(155)
-
(19)
(174)
Repurchase agreements
(552)
-
(552)
552
-
-
(1)
The net position is offset against variation margin cash collateral with central clearing houses included within due from and due to other banks and similar
institutions (these were originally presented in other assets and other liabilities – see note 1.7).
(2)
Cash collateral amounts not offset under IAS 32 in respect of derivatives with other banks are included within due from and due to other banks and similar
institutions. Variation margin cash collateral amounts not offset under IAS 32 in respect of derivatives with central clearing houses are included within due from and
due to other banks and similar institutions (these originally presented within other assets and other liabilities – see note 1.7)
Macroeconomic assumptions, scenarios, and weightings
The Group’s ECL allowance at 31 March 2025 was £739m (30 September 2023: £617m).
Macroeconomic assumptions
During the period, the Group adjusted its macroeconomic assumptions to align with those of its parent company, Nationwide,
following the acquisition on 1 October 2024.
Management exercises judgement in estimating future economic conditions which are incorporated into provisions through
modelling of multiple scenarios. The economic scenarios are reviewed and updated as appropriate on a quarterly basis. The
provision recognised is the probability-weighted sum of the provisions calculated under a range of economic scenarios. The
scenarios and associated probability weights are derived using external data and statistical methodologies, together with
management judgement. The base case scenario is aligned to the Group’s financial planning process. During the period the Group
introduced a fourth macroeconomic scenario to the IFRS 9 models. Management determined that the inclusion of an additional
scenario would more appropriately reflect a wider range of possible economic outcomes than the previous three scenario view
provided. In addition, management also observed that by only selecting three scenarios, the Group was not fully aligned to
prevailing industry best practice.
Probability weightings for each scenario are reviewed quarterly to reflect economic conditions as they evolve. The probability
weightings applied to the scenarios were unchanged over the year and are shown in the table below. As a result of geopolitical
tensions, the potential impact of UK Government tax changes, and US trade policies, the probability weighting for the severe
downside scenario is 15%.
The scenarios and weightings selected were as follows:
Scenario
31 March 2025
(%)
30 September 2023
(%)
Upside
10
10
Base
45
55
Downside
30
35
Severe downside
15
n/a
41
Risk report (continued)
Credit risk (continued)
Macroeconomic assumptions (continued)
In the base case scenario, modest growth in GDP of 1.4% is expected during 2025, following a period of stagnation. In this
scenario, unemployment is forecast to increase to 4.7% by the end of 2025. By contrast, in the downside scenario, GDP reflects
a significant UK recession, and the peak unemployment increases to 6.2%, whilst the severe downside scenario unemployment
peak of 9.3% corresponds with a severe and longer-lasting economic downturn.
Bank rate in the base case scenario is expected to continue to reduce to 3.75% during 2025 and 3.25% by the end of 2028.
Inflation in this scenario is expected to reduce to the Bank of England target rate of 2.0% by the end of 2026. In the downside
scenario, the recession results in Bank rate remaining at low levels from 2025 onwards, in order to stimulate economic demand.
By contrast the severe downside scenario includes a sustained high level of inflation, which requires an increase in Bank rate to
8.5%.
The graphs below show the historical and forecasted GDP level, unemployment rate and average house price for the Group’s
current economic scenarios, as well as the previous base case economic scenario.
42
Risk report (continued)
Credit risk (continued)
Base case – 2025 v 2023 (audited)(1)
The following table shows how the Group’s base case assumptions in the current period have changed from those used at 30
September 2023:
Year
Assumption
2023
2024
2025
2026
2027
2028
2029
%
%
%
%
%
%
%
31 March 2025(1)
Base rate
3.8
3.5
3.5
3.3
3.3
Unemployment
4.7
4.6
4.4
4.3
4.3
GDP
1.4
1.7
1.6
1.6
1.4
Inflation
3.4
2.0
2.0
2.0
2.0
HPI
1.9
2.3
2.7
3.3
3.2
30 September 2023(2)
Base rate
4.7
5.4
4.5
3.5
2.5
Unemployment
4.2
4.5
4.3
3.9
3.9
GDP
0.5
0.4
1.5
2.3
1.5
Inflation
7.6
3.2
1.5
1.0
1.7
HPI
(2.7)
(7.2)
(2.9)
4.6
7.1
(1)
Macroeconomic assumptions have been aligned to Nationwide following acquisition.
(2)
Macroeconomic assumptions provided by Oxford Economics on 1 September 2023 and reported on a calendar year basis unless otherwise stated. The changes in
macroeconomic assumptions between 1 September 2023 and 30 September 2023 were considered as part of the MAs.
Five-year simple averages for the most sensitive inputs of unemployment, GDP and HPI (audited)
31 March 2025(1)
Unemployment
%
GDP
%
HPI
%
Upside
4.0
2.0
4.2
Base
4.5
1.5
2.7
Downside
5.4
1.1
(0.3)
Severe downside(2)
7.1
0.4
(3.3)
30 September 2023
Upside
3.9
2.2
1.3
Base
4.2
1.2
(0.2)
Downside
6.1
0.2
(3.3)
(1)
Macroeconomic assumptions have been aligned to Nationwide following acquisition.
(2)
The number of scenarios included in the IFRS 9 macro-economic models was increased from three to four compared to the prior period.
43
Risk report (continued)
Credit risk (continued)
The use of estimates, judgements and sensitivity analysis
The following are the main areas where estimates and judgements are applied to the ECL calculation:
The use of estimates
Asset lifetimes
The calculation of the ECL allowance is dependent on the expected life of the Group’s portfolios. The Group assumes the
remaining contract term as the maximum period to consider credit losses wherever possible. For the Group’s credit card and
overdraft portfolios, behavioural factors such as observed retention rates and other portfolio level assumptions are taken into
consideration in determining the estimated asset life.
Economic scenarios
The calculation of the Group’s impairment provision is sensitive to changes in the chosen weightings as highlighted above. The
effect on the closing modelled provision of each portfolio as a result of applying a 100% weighting to each of the selected
scenarios is shown below:
31 March 2025
Probability
Weighted(1)
£m
Upside
£m
Base
£m
Downside
£m
Severe
downside
£m
Residential mortgages
44
29
31
37
237
Consumer lending of which:
437
359
366
367
990
Cards
428
350
357
358
974
Personal loans and overdrafts
9
9
9
9
16
Business and commercial lending
86
67
73
87
242
Total
567
455
470
491
1,469
30 September 2023
Probability
Weighted(1)
£m
Upside
£m
Base
£m
Downside
£m
Residential mortgages
20
17
18
24
Consumer lending of which:
399
382
382
433
Cards
364
352(3)
350
391
Personal loans and overdrafts(2)
35
30
32
42
Business and commercial lending
91
81
86
107
Total
510
480
486
564
(1)
In addition to the probability weighted modelled provision shown in the table, the Group holds £78m relative to MAs and £94m of IA provision (30
September 2023: £76m and £30m respectively).
(2)
Salary Finance contributes more than 50% of the combined personal loans and overdrafts ECL.
(3)
Due to a minor model interaction effect, the 100% ECL for upside is marginally higher than the base case.
44
Risk report (continued)
Credit risk (continued)
The use of estimates (continued)
The table below shows the sensitivity at 31 March 2025 to some of the key assumptions used within the ECL calculation:
Increase in provision
£m
10% increase in the probability of the downside scenario (reducing the upside by a corresponding 10%)
3
5% increase in the probability of the severe downside scenario (reducing the downside by a corresponding 5%)
49
One of the criteria for moving exposures between stages is the lifetime PD which incorporates macroeconomic factors. As a
result, the stage allocation will be different in each scenario and so the probability weighted ECL cannot be recalculated using
the scenario ECL provided and the scenario weightings.
Certain asset classes are less sensitive to specific macroeconomic factors, showing lower relative levels of sensitivity. To
ensure appropriate levels of ECL, the relative lack of sensitivity is compensated for through the application of MAs, further detail
of which can be found on page 46. Within each portfolio, the following are the macroeconomic inputs that are more sensitive,
and therefore more likely to drive the move from Stage 1 to Stage 2 under a stress scenario:
•
Residential mortgages: Unemployment and HPI
•
Consumer: Unemployment
•
Business and commercial: Unemployment and HPI
In addition to assessing the ECL impact of applying a 100% weighting to each of the three chosen scenarios, the Group has
also considered the effect changes to key economic inputs would make to the modelled ECL output.
The Group considers the unemployment rate and HPI as the inputs that would have the most significant impact on ECL and has
assessed how these metrics would change ECL across the relevant portfolios, with the reported output assessed against the
base case. All changes have been implemented as immediate effects within the first year of the base case scenario, persisting
throughout the scenario.
The following table discloses the ECL impact of a 10% decrease in HPI on the Group’s Residential mortgage and Business and
commercial lending portfolios:
(audited)
31 Mar 2025
£m
30 Sep 2023
£m
Residential mortgages -10%
3
2
Business and commercial -10%
7
2
Unemployment is a key input that affects all of the Group’s lending categories and the following table highlights the ECL impact
of a one percent increase in the unemployment rate:
(audited)
31 Mar 2025
£m
30 Sep 2023
£m
Residential mortgages +1%
1
1
Consumer lending +1%
20
21
Business and commercial +1%
5
4
While the above sensitivities provide a view of how the ECL would be impacted based on these single changes, such changes
would not ordinarily occur in isolation and the economic inputs used are linked within each chosen scenario.
45
Risk report (continued)
Credit risk (continued)
The use of judgement
SICR
Judgement is required in determining the point at which a SICR has occurred, as it is the point at which a 12-month ECL is
replaced by a lifetime ECL. The Group has developed a series of triggers that indicate where a SICR has occurred when
assessing exposures for the risk of default occurring at each reporting date compared to the risk at origination. There is no
single factor that influences this decision, rather a combination of different criteria that enables the Group to make an
assessment based on the quantitative and qualitative information available. This assessment includes the impact of forward-
looking macroeconomic factors but excludes the existence of any collateral implications. Indicators of a SICR include
deterioration of the residual lifetime PD by set thresholds that are unique to each product portfolio, non-default forbearance
programmes, and watch list status. The Group adopts the backstop position that a SICR will have taken place when the financial
asset reaches 30 DPD. The Group does not have a set absolute threshold by which the PD would have to increase by, in order
to establish that a SICR has occurred, and has implemented an approach with the required SICR threshold trigger varying on a
portfolio and product basis according to the origination PD. The table below illustrates this approach with reference to the
Group’s Residential mortgage, Consumer (credit cards) and Business and commercial portfolios. In each case the illustration is
of the PD threshold based on a five year full lifetime PD (not the annualised equivalent). The business example reflects the
thresholds appropriate for term lending.
Indicators of a SICR include deterioration of the residual lifetime PD by set thresholds that are unique to each product portfolio,
non-default forbearance programmes, and watch list status.
(audited)
Origination PD
SICR Trigger
Residential mortgages
Low origination lifetime PD
2.00%
5.69%
High origination lifetime PD
10.00%
17.69%
Credit cards
Low origination lifetime PD
2.00%
22.34%
High origination lifetime PD
10.00%
25.52%
Business and
commercial
Low origination lifetime PD
2.00%
6.03%
High origination lifetime PD
10.00%
16.70%
Significant adjustments made in modelling provisions
Following the Nationwide acquisition and the subsequent harmonisation of the IFRS 9 methodology, the following table has
been included for the current period. The table below shows key adjustments made in modelling provisions in relation to the
significant areas of estimation uncertainty for the Residential mortgages, Consumer lending and Business and commercial
portfolios, with further details on each provided below.
31 March 2025
Residential
mortgages
Consumer
Business and
commercial
Total
(audited)
£m
£m
£m
£m
PD uplift for affordability risks
8
63
4
75
LGD uplift for property valuation risks
7
-
-
7
PD uplift for credit card persistent debt
-
12
-
12
Total adjustments
15
75
4
94
PD uplift for affordability risks
PD uplift adjustment reflects the ongoing affordability pressures faced by borrowers, primarily within the residential mortgage
portfolio. This adjustment primarily includes the risks associated with borrowers which have switched or are expected to switch
to higher mortgage interest rates in the next two years.
46
Risk report (continued)
Credit risk (continued)
The use of judgement (continued)
LGD uplift for property valuation risks
An adjustment is made to reflect the property valuation risk associated with flats, originally driven by risks for properties subject
to fire safety issues such as unsuitable cladding. We continue to hold an adjustment to provisions for this segment of the market
whilst there is insufficient evidence of a recovery in the value of affected properties.
PD uplift for credit card persistent debt
A borrower who has been paying more in interest, fees and charges than they are paying to reduce their outstanding balance,
for at least three years. The Group provides support to such borrowers, including the offer of forbearance, to help reduce the
level of their credit card debt. To reflect an increase in risk since origination, accounts are moved to Stage 2 and therefore
receive a lifetime ECL.
Definition of default
The PD of a credit exposure is a key input to the measurement of the ECL allowance. Default under Stage 3 occurs when there
is evidence that a customer is experiencing significant financial difficulty, which is likely to affect the ability to repay amounts
due.
MAs
At 31 March 2025, £78m of MAs (30 September 2023: £76m) are included within the total ECL provision of £739m (30
September 2023: £617m).
These are management judgements which impact the ECL provision by increasing (or decreasing) the collectively assessed
modelled output where not all of the known risks identified in a particular product segment have been reflected within the
models. This also takes into account any time lag between the date the macroeconomic assumptions were received and the
reporting date.
The selection of appropriate MAs is a major component in determining the Group’s ECL, the impact of these adjustments and how
they impact the Group’s total reported ECL allowance and coverage ratio for each portfolio is:
31 March 2025(1)
Residential
mortgages
Consumer
Business and
commercial
Total
(audited)
£m
£m
£m
£m
ECL before adjustments (A)
45.1
482.2
134.7
662.0
Adjustments:
Credit card adjustments
-
22.9
-
22.9
To address leveraged lending
-
-
10.0
10.0
To address affordability and rate shocks
7.8
-
-
7.8
Other technical adjustments
1.7
14.0
11.0
26.7
Other adjustments
6.4
0.3
3.4
10.1
Total adjustments (B)
15.9
37.2
24.4
77.5
Total reported ECL (A + B)
61.0
519.4
159.1
739.5
% of total ECL (B / total reported ECL)
26%
7%
15%
10%
Coverage - total
0.11%
7.80%
1.67%
1.03%
Coverage - total ex MAs
0.08%
7.25%
1.42%
0.92%
47
Risk report (continued)
Credit risk (continued)
The use of judgement (continued)
30 September 2023(1)
Residential
mortgages
Consumer
Business and
commercial
Total
(audited)
£m
£m
£m
£m
ECL before adjustments (A)
25.2
400.2
115.5
540.9
Adjustments:
Credit card adjustments
-
27.5
-
27.5
To address economic resilience
5.0
-
15.0
20.0
Additional BTL impact
25.1
-
-
25.1
Other adjustments
1.7
1.3
0.5
3.5
Total adjustments (B)
31.8
28.8
15.5
76.1
Total reported ECL (A + B)
57.0
429.0
131.0
617.0
% of total ECL (B / total reported ECL)
56%
7%
12%
12%
Coverage - total
0.10%
6.65%
1.60%
0.84%
Coverage - total ex MAs
0.04%
5.87%
1.33%
0.74%
(1) The impact of rounding means that the combination of the probability weighted total and IA provision may not fully align to the portfolio sections.
Residential mortgages
The assessment of the lending portfolio is conducted to identify areas of weakness which the models cannot incorporate and
the modelled ECL may therefore not be sufficient. In addition, a process of judgemental MA alignment with Nationwide has also
been completed resulting in the application of four new MAs; (i) Affordability, driven by an assumed average reduction in
disposable monthly income; (ii) Rate shock, defined as a reduction in disposable monthly income; and other adjustments being
(iii) Valuation Risk, potential over-estimation of valuations for flats; and (iv) Past Term Interest Only, the possibility of losses
arising from mortgages that are past term interest only.
With the inclusion of the severe downside adjustment and the four new MAs, the following are no longer required and have
been removed; (i) Buy-to-Let segment, which was held to ensure that coverage for buy to let mortgages is higher than that for
residential mortgages; (ii) MES adjustment, which was held to reflect the judgment that forecast default rates for some capital
and interest mortgages were too low; and (iii) Combined Risk, which was held as a result of fixed term interest only and
downturn buy to let risk. This included six immaterial (c.£0.5m) MAs that span a range of small ECL risks for mortgages. Two of
the six have been removed.
Consumer lending
A key MA movement in the period was, a new MA for Persistent Debt, included as part of the alignment exercise to move
accounts in late-stage Persistent Debt (27 and 36 months) directly into Stage 2. This mitigates the risk that customers in
Persistent Debt who will not choose to move to a repayment plan, can have a materially higher default rate. The MA relating to
the upgrade in credit reference data and models has been removed following the system implementation in October 2024.
MAs are in place for Credit Card LGD (reflecting a change in debt sale price since development) and Credit Card EAD (for
model underprediction). New behavioural scoring models and new credit reference agency data were implemented in October
2024 and are expected to perform well. A new suite of IFRS 9 models are close to completion. As these are not yet complete
and a robust ECL impact cannot be assessed, no MAs has been identified as being required in anticipation of the future models.
There is no requirement for MAs in relation to external factors not captured within the model outputs.
Business and commercial lending
There are two new judgemental MAs introduced in the period, AFD and leveraged lending. AFD is held to reflect the potential for
delayed identification of customers in approaching difficulty, a precursor to arrears and a Stage 2 trigger. Leveraged lending is held
to mitigate the risk of the LGD model underpredicting for high value, leveraged lending.
New macro-economic models have been developed and are being assessed, given the timing of this and the likely subsequent
implementation of the models, an MA for their ECL impact has been raised.
No new MAs are required for any models within this portfolio.
48
Risk report (continued)
Credit risk (continued)
The use of judgement (continued)
Macroeconomic assumptions (audited)
Annual macroeconomic assumptions used over the five-year forecast period in the scenarios and their weighted averages are
as follows:
31 March 2025
Annual growth rate(1)
5-year
average(2)
%
Dec-24 to
peak(3)
%
Dec-24 to
trough(3)
%
Forecast
Scenario
Weighting
Economic
measure
2025
%
2026
%
2027
%
2028
%
2029
%
Upside
10%
GDP growth
1.7
2.0
2.0
2.0
2.0
2.0
10.2
0.3
HPI growth
5.4
4.5
3.8
3.8
3.8
4.2
23.1
1.3
Unemployment
4.1
4.0
4.0
4.0
4.0
4.0
4.3
4.0
Bank rate
4.3
4.3
4.3
4.3
4.3
4.3
4.5
4.3
CPI
2.5
2.0
2.0
2.0
2.0
2.1
2.7
2.0
Base
45%
GDP growth
1.4
1.7
1.6
1.6
1.4
1.5
8.0
0.2
HPI growth
1.9
2.3
2.7
3.3
3.2
2.7
14.3
0.1
Unemployment
4.7
4.6
4.4
4.3
4.3
4.5
4.7
4.3
Bank rate
3.8
3.5
3.5
3.3
3.3
3.6
4.5
3.3
CPI
3.4
2.0
2.0
2.0
2.0
2.3
3.5
1.8
Downside
30%
GDP growth
(0.9)
(1.2)
3.3
2.4
1.9
1.1
5.6
(2.1)
HPI growth
(4.9)
(9.4)
(3.7)
8.7
9.3
(0.3)
(0.6)
(17.1)
Unemployment
5.4
6.2
5.6
5.2
5.0
5.4
6.2
4.7
Bank rate
2.5
0.5
0.5
0.5
0.5
1.3
4.5
0.5
CPI
1.5
0.3
1.2
1.8
2.0
1.5
2.8
0.3
Severe
downside
15%
GDP growth
(1.8)
(3.7)
2.8
2.8
2.2
7.1
9.3
4.8
HPI growth
(12.4)
(18.1)
(1.8)
9.3
9.7
(3.3)
(1.4)
(30.1)
Unemployment
5.9
8.4
8.5
7.0
6.0
7.1
9.3
4.8
Bank rate
6.5
8.0
5.0
4.3
3.5
5.4
8.5
3.5
CPI
6.5
7.0
2.2
2.0
2.0
4.1
8.0
2.0
Weighted
average
GDP growth
0.3
0.1
2.4
2.1
1.8
HPI growth
(1.9)
(4.1)
0.2
5.9
6.1
Unemployment
5.0
5.6
5.3
4.9
4.7
Bank rate
3.8
3.4
2.9
2.7
2.6
CPI
3.2
2.2
1.8
1.9
2.0
(1)
The average rate calculations differ from prior period following the alignment of Macroeconomic assumptions to Nationwide following acquisition.
(2)
The average rate for GDP and HPI is based on the cumulative annual growth rate over the forecast period. Average unemployment and CPI is calculated
using a simple average using quarterly points.
(3)
GDP growth and HPI are shown as the largest cumulative growth/fall over the forecast period. The unemployment rate and CPI is shown as the
highest/lowest rate over the forecast period.
49
Risk report (continued)
Credit risk (continued)
The use of judgement (continued)
30 September 2023(1)
Scenario
VMUK
weighting
Economic measure (2)
2023
%
2024
%
2025
%
2026
%
2027
%
Upside
10%
GDP
0.8
3.0
2.6
3.0
1.6
HPI
(1.3)
(4.8)
(0.9)
6.6
7.0
Unemployment
4.2
4.1
3.9
3.8
3.7
Base rate
4.8
6.5
6.0
5.0
4.0
Inflation
7.6
4.2
2.5
1.1
1.7
Base
55%
GDP
0.5
0.4
1.5
2.3
1.5
HPI
(2.7)
(7.2)
(2.9)
4.6
7.1
Unemployment
4.2
4.5
4.3
3.9
3.9
Base rate
4.7
5.4
4.5
3.5
2.5
Inflation
7.6
3.2
1.5
1.0
1.7
Downside
35%
GDP
(0.1)
(3.3)
0.7
1.9
1.6
HPI
(4.7)
(12.7)
(7.6)
1.0
7.5
Unemployment
4.3
5.7
6.7
7.0
6.8
Base rate
4.6
4.5
3.5
2.5
1.5
Inflation
7.4
1.7
0.4
0.7
1.7
Weighted average
GDP
0.3
(0.6)
1.3
2.2
1.6
HPI
(3.3)
(8.9)
(4.4)
3.6
7.3
Unemployment
4.2
4.9
5.1
5.0
4.9
Base rate
4.7
5.2
4.3
3.3
2.3
Inflation
7.5
2.8
1.2
0.9
1.7
(1)
Macroeconomic assumptions provided by Oxford Economics on 1 September 2023 and reported on a calendar year basis unless otherwise stated.
The changes in macroeconomic assumptions between 1 September 2023 and 30 September 2023 have been considered as part of the MAs.
(2)
The percentages shown for base rate, unemployment and inflation are averages. GDP is the year-on-year movement, with HPI the Q4 v Q4 movement.
50
Risk report (continued)
Financial risk
Section
Page Tables
Page
Financial risk overview
51
Risk appetite
51
Capital risk
51
Mitigation
51
Measurement
51
Monitoring
52
Capital ratios and requirements
52
Regulatory capital
53
Minimum capital requirements
54
Funding and liquidity risk
55
Exposures
55
Measurement
55
Monitoring
55
Mitigation
56
Sources of funding
56
Sources of funding
56
Liquidity coverage ratio
57
Liquid asset portfolio
58
Encumbered assets
58
Encumbered assets by asset category
59
Assets and liabilities by maturity
60
Assets and liabilities by maturity
60
Cash flows payable under financial liabilities by
contractual maturity
62
Cash flows payable under financial liabilities by
contractual maturity
62
Analysis of debt securities in issue by residual maturity
62
Analysis of debt securities in issue by residual maturity 62
External credit ratings
63
External credit ratings
63
Market risk
63
Exposures
63
Measurement
64
Mitigation
64
Monitoring
65
Value at Risk (VaR)
65
Net interest income
65
Market risk linkage to the balance sheet
67
Market risk linkage to the balance sheet
66
Structural hedge
67
LIBOR replacement
67
Pension risk
67
Risk appetite
67
Liabilities
68
Assets
68
Exposure
69
Mitigation
69
Monitoring
69
51
Risk report (continued)
Financial risk (continued)
The financial risk framework underpins the Group’s robust balance sheet, ensuring strategy is resilient and responsive to
external pressures and changing regulatory obligations.
Financial risk covers several categories of risk which impact the way in which the Group can support its customers in a safe and
sound manner. They include capital risk, funding risk, liquidity risk, market risk and pension risk.
The acquisition of the Group by Nationwide has not impacted the management of financial risk, which continues to be monitored
and controlled on a standalone basis. The Group continues to meet regulatory requirements, for example capital, funding,
liquidity and market risk on a solo basis and maintains an independent risk appetite.
Risk appetite
The primary objective for the management of financial risks is to control the Group’s risk profile within approved risk limits to
maintain the confidence of the Group’s customers and other stakeholders. Financial risk is also managed to protect current and
future earnings from the impact of market volatility. The Group applies a prudent approach to financial risk to safeguard the
ongoing strength and resilience of the balance sheet. These activities are undertaken in a manner consistent with the Group’s
regulatory obligations.
Financial risk appetite is approved by the Board, with authority delegated to ALCO for subsequent implementation and
monitoring. The Board has established a range of capital risk appetite measures including CET1 and leverage. Measures for
funding and liquidity risks consider the structure of the balance sheet, the Group’s overall funding profile and compliance with
the regulatory LCR and NSFR requirements. Board-approved risk appetite covers both regulatory and internal liquidity
requirements and the need to maintain access to liquidity resources sufficient to accommodate outflows of funds in a range of
stress scenarios and time periods.
The Group participates in wholesale markets and uses financial instruments to fund its banking activities and manage the
liquidity and market risks arising from these activities. The Group establishes an appetite for these risks based on an overriding
principle that the Group will not engage in proprietary risk taking.
The Group’s pension risk appetite is a component of the Group-wide RAS framework for the management of balance sheet risks
and is considered in the context of potential capital impacts as a result of volatility in the Scheme’s valuations and future
contributions.
Ring-fencing
On 13 January 2025, The Financial Services and Markets Act 2000 (Ring-fenced Bodies, Core Activities, Excluded Activities
and Prohibitions) (Amendment) Order 2025 was passed. With an effective date of 4 February 2025, the impact of the legislation
meant the Group is no longer subject to the structural reform rules, commonly referred to as ring-fencing. This position would
change if the Group was to exceed a threshold in relation to Trading Assets as a percentage of Tier 1 Capital. The changes do
not have a material impact on the activities of the Group.
Capital risk
Capital is held by the Group to cover inherent risks in a normal and stressed operating environment, to protect unsecured
creditors and investors and to support the Group’s strategy of sustainable growth. Capital risk is the risk that the Group has or
forecasts insufficient capital and other loss-absorbing debt instruments to operate effectively.
Mitigation
The Group’s capital risk policy provides the framework for the management of capital within the Group. The objectives of the
policy are to efficiently and sustainably manage the capital base while maintaining capital adequacy and ensuring that excessive
leverage is not taken, so meeting regulatory requirements and managing the rating agencies’ assessments of the Group. This
includes meeting minimum regulatory requirements, operating within Board approved risk appetite and supporting its strategic
goals. The Nationwide Group Capital Framework supports the Group capital risk policy.
Measurement
The Group manages capital in accordance with prudential rules issued by the Prudential Regulation Authority (PRA) and the
FCA. Pillar 1 capital requirements are calculated in respect of credit risk, operational risk, market risk, counterparty credit risk
and credit valuation adjustments. The capital requirements for credit risk are calculated using the following approaches:
•
Retail mortgages: IRB.
•
Business lending: Foundation internal ratings based (FIRB).
•
Specialised lending: IRB slotting.
•
All other portfolios: Standardised approach, via either sequential IRB implementation or Permanent Partial Use.
52
Risk report (continued)
Financial risk (continued)
Monitoring
The Board approves the capital risk appetite, defining minimum levels of capital across a range of capital ratios and
measurements. The internal appetite ensures the Group operates above minimum regulatory requirements with reporting
conducted through ALCO, Board and Executive Risk Committee. The capital plan, which assesses capital adequacy on a
forward-looking basis, is also approved by the Board annually. The annual planning process is supported by rolling forecasting
which is reported to ALCO monthly. This ensures that performance trends are reviewed and that there is transparency of the
impact on capital ratios, risk appetite and the outlook. As part of the monthly forecasting process, ALCO reviews scenario
analysis, considering adverse impacts to economic conditions and modelling sensitivities, including changes to regulation.
These processes all support the Group’s management of capital and informs the CET1 target operating range of 13.0%-13.5%.
Further information on capital risk can be found in the Group’s annual Pillar 3 Disclosure 2025.
Capital ratios and requirements(1)
31 March 2025
30 September 2023(1)
CET1
Total
capital
Leverage
CET1
Total
capital
Leverage
Pillar 1 requirements
4.50%
8.00%
3.25%
4.50%
8.00%
3.25%
Pillar 2A requirements
2.10%
3.74%
-
1.67%
2.97%
-
Minimum capital requirements
6.60%
11.74%
3.25%
6.17%
10.97%
3.25%
Combined buffers
4.50%
4.50%
0.70%
4.50%
4.50%
0.70%
Overall capital requirement
11.10%
16.24%
3.95%
10.67%
15.47%
3.95%
Closing reported capital ratios
14.41%
19.64%
5.61%
14.74%
21.16%
5.00%
Surplus above capital requirements
3.31%
3.40%
1.66%
4.07%
5.69%
1.05%
(1)
In line with regulatory submissions the prior year regulatory capital tables have not been restated for the impact of aligning the Group’s accounting policies
and presentation basis with Nationwide.
The Group continues to exceed its CET1 capital requirements with a surplus of 3.31% (£915m) at 31 March 2025. The Group’s
leverage exposures were £83,455m, with a Tier 1 capital surplus of 1.66% (£1,382m) held in excess of the leverage
requirement.
53
Risk report (continued)
Financial risk (continued)
The Group’s capital resources position as at 31 March 2025 is summarised below:
Regulatory capital(1)
31 Mar 2025
30 Sep 2023
£m
£m
Statutory total equity
5,551
5,607
CET1 capital: regulatory adjustments(2)
Other equity instruments
(693)
(594)
Defined benefit pension fund assets
(267)
(333)
Prudent valuation adjustment
(13)
(5)
Intangible assets
(96)
(162)
Goodwill
(31)
(11)
Deferred tax asset relying on future profitability
(174)
(261)
Cash flow hedge reserve
(168)
(496)
AT1 coupon accrual
(15)
(12)
TMLA fee
(18)
-
Foreseeable dividend on ordinary shares
-
(27)
Excess expected losses
(99)
(103)
IFRS 9 transitional adjustments
-
112
Proportional consolidated gains/(losses) arising from JV(3)
9
(4)
Total regulatory adjustments to CET1
(1,565)
(1,896)
Total CET1 capital
3,986
3,711
AT1 capital
AT1 capital instruments
693
594
Total AT1 capital
693
594
Total Tier 1 capital
4,679
4,305
Tier 2 capital (4)
Subordinated debt
754
1,022
Total Tier 2 capital
754
1,022
Total regulatory capital
5,433
5,327
(1)
Data in the table is reported under CRD V on a fully loaded basis with IFRS 9 transitional arrangements applied. At 31 March 2025, the Group has no IFRS 9
transitional arrangements remaining on a Group basis.
(2)
A number of regulatory adjustments to CET1 capital are required under CRD V regulatory capital rules.
(3)
The Group applies a proportional consolidation approach to the Salary Finance JV, which is accounted for in the consolidated financial statements using the
equity method.
(4)
To align to NBS Group presentation, Tier 2 capital is measured using the accounting carrying value from March 2025.
The Group’s CET1 capital increased by £275m during the period. Capital generated from profit was utilised to fund AT1
distributions of £100m in the period, together with £26m dividends and £63m share buyback prior to the acquisition of the Group
by Nationwide. Post acquisition, £800m of downstream capital from Nationwide absorbed the capital impact of accounting
alignment adjustments and the TMLA fee payable.
In December 2023, the Group redeemed £250m of 7.875% Fixed Rate Reset Callable Notes due 2028, held as Tier 2 capital.
The Group also issued a new £350m AT1 instrument and simultaneously tendered 42% of its £250m 9.25% AT1 instrument,
first callable in June 2024 (note 4.1.2). The Group redeemed the residual £144m 9.25% AT1 securities on their call date in June
2024.
54
Risk report (continued)
Financial risk (continued)
RWA
31 March 2025
30 September 2023
Minimum capital requirements
Exposure
RWA
Minimum
capital
requirement
Exposure
RWA
Minimum capital
requirement
£m
£m
£m
£m
£m
£m
Retail mortgages
58,092
9,343
747
60,354
9,072
726
Business lending
13,656
9,104
728
12,635
6,990
559
Other retail lending
18,286
4,666
373
17,586
4,819
385
Other lending
17,832
320
26
18,328
364
29
Other(1)
811
919
74
592
674
54
Total credit risk
108,677
24,352
1,948
109,495
21,919
1,753
Credit valuation adjustment
76
6
278
22
Operational risk
3,117
249
2,833
227
Counterparty credit risk
111
9
146
12
Total
108,677
27,656
2,212
109,495
25,176
2,014
(1)
The items included in the Other exposure class that attract a capital charge include items in the course of collection, fixed assets, prepayments, other debtors
and deferred tax assets that are not deducted.
RWA increased c.£2.5bn to £28bn primarily due to asset quality movement related to growth of the Business portfolio and
further quality movement in the Mortgage portfolio with increased lending to higher LTV brackets and the impact from quarterly
PD re-calibrations, partially offset by movements in Hybrid MAs. In addition there were changes in the identification of SME
Lending and the associated removal of the SME support factor.
The BoE as the UK Resolution Authority has published its framework for setting MREL. This requires the Group to hold capital
resources and eligible debt instruments equal to the greater of two times the Total Capital Requirement or two times the UK
Leverage Ratio requirement. In addition to MREL, the Group must also hold any applicable capital buffers, which together with
MREL represent the Group's LAC requirement. As at 31 March 2025, the Group’s risk based LAC requirement of 28.0% of RWA
exposures (or 9.3% when expressed as a percentage of leverage) was greater than the leverage based LAC requirement of
8.6% of leverage exposures, meaning the RWA measure is the binding requirement.
MREL resources were £8.4bn (30 September 2023: £8.0bn) equivalent to 30.5% of RWA exposures (30 September 2023:
31.9%) or 10.1% when expressed as a percentage of leverage (30 September 2023: 9.3%). This provides prudent headroom of
£0.7bn or 2.5% above the LAC requirement expressed as RWAs, or 0.8% above the LAC requirement of 9.3% when expressed
as a percentage of leverage exposures.
55
Risk report (continued)
Financial risk (continued)
Funding and liquidity risk
Funding risk occurs when the Group is unable to raise or maintain funds of sufficient quantity and quality to support the delivery
of the business plan or sustain lending commitments. Prudent funding risk management reduces the likelihood of liquidity risks
occurring, increases the stability of funding sources, minimises concentration risks and ensures future balance sheet growth
is sustainable.
Liquidity risk occurs when the Group is unable to meet its current and future financial obligations as they fall due or at
acceptable cost, or when the Group reduces liquidity resources below internal or regulatory stress requirements.
Exposures
The Group is predominantly funded by personal and business deposits. Customer funding is supported by the Group’s
wholesale funding programmes, medium-term secured funding issuance (for example the Group’s securitisation programmes),
Regulated Covered Bonds and unsecured medium-term notes. The Group has also drawn against the BoE Term Funding
Scheme with additional incentives for SMEs (TFSME).
Funding risk exposures arise from an unsustainable or undiversified funding base, for example a reliance on short-term
wholesale deposits. The risk may result in deviation from funding strategy, negatively impact market or customer perception,
increase the acquisition cost of new funds or reduce lending capacity, thereby adversely impacting financial performance and
stability.
The Group’s primary liquidity risk exposure arises through the redemption of retail deposits where customers have the ability to
withdraw funds with limited or no notice. Exposure also arises from the refinancing of customer and wholesale funding at
maturity and the requirement to fund new and existing committed lending obligations including mortgage pipeline and credit card
facilities.
Measurement
Funding and liquidity risks are subject to a range of measures contained within the Group’s risk appetite which reflect both
regulatory requirements, as a minimum, and the Group’s own view on risk sensitivities. The Group risk appetite is supported by
a series of limits agreed by ALCO. These measures provide a short- and long-term view of risks under both normal and stressed
conditions. The measures focus on: cash outflows and inflows under stress; concentration risks; refinancing risks; asset
encumbrance; and the quantum, diversity and operational capability of mitigating actions.
The Group’s funding plan establishes an acceptable level of funding risk which is approved by the Board and is consistent with
risk appetite and the Group’s strategic objectives. The development of the Group’s funding plan is informed by the requirements
of the Group’s financial risk policies.
A series of metrics is used across the Group to measure risk exposures, including funding ratios, limits to concentration risk and
maximum levels of encumbrance.
Liquidity is managed in accordance with the Internal Liquidity Adequacy Assessment Process (ILAAP), which is approved by the
Board. Liquidity risk exposures are subject to assessment under both regulatory and internal requirements. The volume and
quality of the Group’s liquid asset portfolio is defined through a series of stress tests across a range of time horizons and stress
conditions. The High-Quality Liquid Asset (HQLA) requirement is quantified as the outflow of funds under a series of stress
scenarios less the impact of inflows from assets. Stress cash outflow assumptions have been established for individual liquidity
risk drivers across idiosyncratic and market-wide stresses.
The Treasury function is responsible for the development and execution of strategy subject to oversight from the Risk function
and review at ALCO. The Group continues to maintain its strong funding and liquidity position and seeks to achieve an
appropriate balance between profitability, liquidity risk and balance sheet optimisation.
Monitoring
Liquidity is monitored and measured daily by the Group, with reporting conducted through ALCO and the Executive Risk
Committee. In a stress situation or in adverse conditions, the level of monitoring and reporting is increased commensurate with
the nature of the stress event.
Monitoring and control processes are in place against internal and regulatory liquidity requirements. The Group monitors a
range of market and internal early warning indicators on a routine basis for early signs of liquidity risk in the market or specific to
the Group. These indicators cover a mixture of quantitative and qualitative measures including daily variation of customer
balances, measurement against stress requirements and monitoring of the macroeconomic environment.
56
Risk report (continued)
Financial risk (continued)
Funding and liquidity risk (continued)
Mitigation
The Group holds a portfolio of HQLA that can be utilised to raise funding in times of stress. The size of the HQLA portfolio is
calibrated based on a view of potential outflows under both systemic and idiosyncratic stress events. The Group has several
sources of funding which are well-diversified in terms of the type of instrument and product, counterparty, term structure and
market. Wholesale funding is used to support balance sheet growth, lengthen the contractual tenor of funding and diversify
funding sources. These funding programmes are a source of strength for the Group and leverage the Group’s high-quality
mortgage book as collateral for secured funding. In addition, the Group can use the repo market for managing cash flows and
bilateral relationships to generate funds and can also participate in BoE operations through the Sterling Monetary Framework
(SMF) for example TFSME.
The funding plan includes an assessment of the Group’s capacity for raising funds across a wide range of primary funding
sources, thereby mitigating funding risk. Refinancing risks are carefully managed and are subject to controls overseen by ALCO.
The Group recovery plan has been established for management of an escalated liquidity requirement, if the Group experiences
either restricted access to wholesale funding or a significant increase in the withdrawal of funds. The plan identifies triggers for
escalation, assesses capacity, details the actions required, allocates the key tasks to individuals, provides a time frame and
defines the governance framework to manage the action plan and return the balance sheet structure within appetite.
The Group operates a Funds Transfer Pricing system, a key purpose of which is to ensure that liquidity risk and funding costs
are factors in the pricing of loans and deposits.
Sources of funding (audited)
The table below provides an overview of the Group’s sources of funding as at 31 March 2025:
31 Mar 2025
£m
30 Sep 2023
£m
Restated(1)
Total assets
89,797
91,431
Less: other liabilities(2)
(2,986)
(2,564)
Funding requirement
86,811
88,867
Funded by:
Customer deposits
70,383
66,827
Debt securities in issue
9,921
9,719
Due to other banks and similar institutions
956
7,069
of which:
Secured loans
910
6,291
Securities sold under agreements to repurchase
10
552
Transaction balances
32
149
Deposits
4
77
Equity
5,551
5,252
Total funding
86,811
88,867
(1)
The prior year has been restated following the alignment of the Group’s accounting policies and presentation basis with Nationwide. Refer to note 1.7 for
further details.
(2)
Other liabilities include derivatives, deferred tax liabilities, provisions for liabilities and charges, accruals and deferred income, and other liabilities as per
the balance sheet line item.
The Group’s funding objective is to prudently manage the sources and tenor of funds to provide a sound base from which to
support sustainable lending growth. At 31 March 2025, the Group had a funding requirement of £86,811m (30 September 2023
(restated): £88,867m) with the majority being used to support loans and advances to customers. During the period, the Group
has been comfortably in excess of regulatory and internal requirements. The 12-month average NSFR as at 31 March 2025 is
141% (30 September 2023: 136%).
57
Risk report (continued)
Financial risk (continued)
Funding and liquidity risk (continued)
Liquid assets
The quantity and quality of the Group’s liquid assets are calibrated to the Board’s view of liquidity risk appetite and remain at a
prudent level above regulatory requirements.
Average
LCR
31 Mar 2025
£m
30 Sep 2023
£m
Eligible liquidity buffer
14,868
13,798
Net stress outflows
9,353
9,424
Surplus
5,515
4,374
LCR
159%
146%
The liquid asset portfolio provides a buffer against sudden and potentially sharp outflows of funds. Liquid assets must therefore
be high-quality so they can be realised for cash and cannot be encumbered for any other purpose (for example to provide
collateral for payments systems). The liquid asset portfolio is primarily comprised of cash at the BoE, UK Government securities
(Gilts) and listed securities (for example bonds issued by supra-nationals and AAA-rated covered bonds).
The volume and quality of the Group’s liquid asset portfolio is defined through a series of internal stress tests across a range of
time horizons and stress conditions.
The key risk driver assumptions applied to the scenarios are:
Liquidity risk driver
Internal stress assumption
Retail funding
Severe unexpected withdrawal of retail deposits by customers arising from redemption or
refinancing risk.
No additional deposit inflows are assumed.
Wholesale funding
Limited opportunity to refinance wholesale contractual maturities. Full outflow of secured and
unsecured funding during the refinancing period, with no reinvestment of funding.
Off-balance sheet
Cash outflows during the period of stress as a result of off-balance sheet commitments such as
mortgage pipeline, undrawn credit card facilities and collateral commitments. Lending outflows,
over and above contractual obligations, are honoured as the Group preserves ongoing viability.
Intra-day
Other participants in the payment system withhold or delay payments or customers increase
transactions resulting in reduced liquidity.
Liquid assets
The liquidity portfolio value is reduced, reflecting stressed market conditions.
The Group monitors the movements in its credit ratings and the related requirement to post collateral for payment systems and
clearing houses. These figures are not considered material compared to the volume of unencumbered liquid assets.
58
Risk report (continued)
Financial risk (continued)
Funding and liquidity risk (continued)
As at 31 March 2025, the Group held eligible liquid assets well in excess of 100% of net stress outflows and Pillar 2 liquidity
requirements, as defined through internal risk appetite.
Average
31 Mar 2025
£m
Average
30 Sep 2023
£m
31 Mar 2025
£m
30 Sep 2023
£m
Change
%
Liquid asset portfolio(1) (audited)
Level 1
Cash and balances with central banks
8,969
8,940
0.3
9,624
9,604
UK Government treasury bills and gilts
2,237
1,655
35.2
1,808
1,182
Other debt securities
3,136
3,153
(0.5)
3,086
2,782
Total level 1
14,342
13,748
4.3
14,518
13,568
Level 2(2)
623
471
32.3
602
327
Total LCR eligible assets
14,965
14,219
5.2
15,120
13,895
(1) Excludes encumbered assets.
(2) Includes Level 2A and Level 2B.
The liquid asset portfolio is marked to market and fully hedged from an interest, inflation and foreign exchange risk perspective.
All fair value movements are therefore recognised in CET1 via the income statement (market risk) or FVOCI reserve (credit
risk). The Interest Rate Risk in the Banking Book (IRRBB) stress testing framework includes limits to manage the stressed credit
spread risk arising from hedging the fixed rate securities in the Group’s liquid asset portfolio. This ensures the composition of the
total portfolio is controlled and the exposure will not exceed internal appetite or the amount of capital allocated.
Encumbered assets
The Group manages the level of asset encumbrance to ensure appropriate volumes of assets are maintained to support future
planned and potential stressed funding requirements. The Group RAS includes an internal limit for levels of encumbrance.
Reasons for asset encumbrance include, among others, supporting the Group’s secured funding programmes to provide stable
term funding to the Group, the posting of assets in respect of drawings under the TFSME scheme, use of assets as collateral for
payments systems to support customer transactional activity and providing security for the Group’s issuance of Scottish
bank notes.
59
Risk report (continued)
Financial risk (continued)
Funding and liquidity risk (continued)
Encumbered assets by asset category (audited)
Assets encumbered with non-Central Bank
counterparties
Other assets
Covered
Bonds
£m
Securitisations
£m
Other
£m
Total
£m
Positioned at the
Central Bank
(including
encumbered)
£m
Assets not positioned at the Central Bank
Total
£m
31 March 2025
Readily
available for
encumbrance
£m
Other assets
capable of being
encumbered
£m
Cannot be
encumbered
£m
Total
£m
Loans and advances to customers
5,769
3,848
-
9,617
14,094
28,352
19,056
-
61,502
71,119
Cash and balances with central banks
-
-
-
-
2,305
8,577
-
-
10,882
10,882
Due from other banks and similar institutions
-
242
101
343
-
28
-
-
28
371
Derivatives
-
-
-
-
-
-
-
48
48
48
Financial instruments at FVOCI
-
-
700
700
-
5,497
-
-
5,497
6,197
Other assets
-
-
-
-
-
-
-
1,180
1,180
1,180
Total assets
5,769
4,090
801
10,660
16,399
42,454
19,056
1,228
79,137
89,797
Assets encumbered with non-Central Bank
counterparties
Other assets
Covered
Bonds
£m
Securitisations
£m
Other
£m
Total
£m
Positioned at the
Central Bank
(including
encumbered)
£m
Assets not positioned at the Central Bank
30 September 2023(1)
Readily
available for
encumbrance
£m
Other assets
capable of being
encumbered
£m
Cannot be
encumbered
£m
Total
£m
Total
£m
Loans and advances to customers
5,944
3,807
-
9,751
17,770
24,995
19,788
-
62,553
72,304
Cash and balances with central banks
-
-
-
-
2,797
8,485
-
-
11,282
11,282
Due from other banks and similar institutions
97
262
310
669
-
12
-
-
12
681
Derivatives
-
-
-
-
-
-
-
135
135
135
Financial instruments at FVOCI
-
-
1,404
1,404
-
4,780
-
-
4,780
6,184
Other assets
-
-
-
-
-
-
-
845
845
845
Total assets
6,041
4,069
1,714
11,824
20,567
38,272
19,788
980
79,607
91,431
(1)
The prior year has been restated following the alignment of the Group’s accounting policies and presentation basis with Nationwide. Refer to note 1.7 for further details. In addition some balances have been reallocated following the alignment of
presentation basis with Nationwide. £2,276m of loans and advances to customers that were previously considered ‘cannot be encumbered’ as they couldn’t be utilised in existing VMUK funding platforms, are considered capable of being
encumbered by Nationwide as they could be utilised in alternative funding options which is now reflected above. Similarly to align with Nationwide’s basis of presentation, £12m of due from other banks and similar institutions previously recognised
as capable of being encumbered have been reclassified to readily available for encumbrance. Within other assets (£492m) fair value adjustments for portfolio hedged risk, £2m investment securities at FVTPL and £184m property, plant and
equipment previously recognised as capable of being encumbered have been reclassified to cannot be encumbered.
60
Risk report (continued)
Financial risk (continued)
Funding and liquidity risk (continued)
The Group’s total non-central bank asset encumbrance decreased by £1,164m to £10,660m as at 31 March 2025. This was
primarily due to the removal of requirements to post derivative collateral for the Covered Bond programme following a ratings
upgrade on 1 October 2024.
Cash and balances with central banks of £10,882m, as per note 3.1.1.2, include: £2,305m of assets that are encumbered to
support the issuance of Scottish bank notes (excluding notes not in circulation) and to support payments systems and £115m
excluded from LCR to cover operating expenses.
Financial assets at FVOCI of £6,197m, as per note 3.1.2, include: £700m of encumbered UK Government treasury bills and
gilts, £197m of which is encumbered to support Operational Continuity in Resolution.
Encumbered loans and advances to customers for Covered Bonds and Securitisations shown above excludes excess over-
collateralisation within those pools above that are required to support bond issuance.
Assets and liabilities by maturity (audited)
The following tables represent a breakdown of the Group’s balance sheet, according to the contractual maturity of the assets
and liabilities. Many of the longer-term monetary assets are variable rate products, with behavioural maturities shorter than the
contractual terms. The majority of customer deposits are repayable on demand or at short notice on a contractual basis,
with behavioural maturities typically longer than their contractual maturity. Accordingly, this information is not relied upon by the
Group in its management of interest rate risk. The Group has disclosed certain term facilities within loans and advances to
customers with a revolving element at the maturity of the facility as this best reflects their contractual maturity.
Group(1)
3 months
or less
3 to 12
months
1 to 5
years
Over 5
years
No
specified
maturity(2)
Call
Total
31 March 2025
£m
£m
£m
£m
£m
£m
£m
Financial assets
Financial instruments
At amortised cost
Loans and advances to customers
755
2,517
1,269
6,638
54,202
5,691
71,072
Fair value adjustment for portfolio hedged risk
-
-
-
(5)
(111)
-
(116)
Cash and balances with central banks
9,945
-
-
-
-
937
10,882
Due from other banks and similar institutions
253
-
-
-
-
118
371
At FVOCI
-
148
529
2,835
2,685
-
6,197
At FVTPL
Loans and advances to customers
-
-
2
10
35
-
47
Derivatives
5
30
15
(4)
2
-
48
Other
-
-
-
-
-
2
2
Total financial assets
10,958
2,695
1,815
9,474
56,813
6,748
88,503
Financial liabilities
Financial instruments
At amortised cost
Customer deposits
47,172
7,484
14,365
1,362
-
-
70,383
Debt securities in issue
-
470
1,961
7,490
-
-
9,921
Due to other banks and similar institutions
36
10
10
900
-
-
956
Due to parent entity
-
7
-
748
-
-
755
At FVTPL
Derivatives
-
(4)
12
108
16
-
132
Total financial liabilities
47,208
7,967
16,348
10,608
16
-
82,147
Off balance sheet items
Financial guarantees
-
12
33
15
2
38
100
Other credit commitments
19,003
-
-
-
-
-
19,003
Total off-balance sheet items
19,003
12
33
15
2
38
19,103
(1) The analysis excludes certain financial assets and liabilities relating to accruals, trade payables and settlement balances which are generally short-term in
nature and lease liabilities.
(2) The no specified maturity within loans and advances to customers relates to credit cards.
61
Risk report (continued)
Financial risk (continued)
Funding and liquidity risk (continued)
Assets and liabilities by maturity (continued)
Group(1)
3 months
or less
3 to 12
months
1 to 5
years
Over 5
years
No specified
maturity(3)
Call
Total
30 September 2023 restated(2)
£m
£m
£m
£m
£m
£m
£m
Financial assets
Financial instruments
At amortised cost
Loans and advances to customers
748
2,772
935
6,327
56,046
5,417
72,245
Fair value adjustment for portfolio hedged risk
-
(1)
(1)
(20)
(470)
-
(492)
Cash and balances with central banks
10,193
-
-
-
-
1,089
11,282
Due from other banks and similar institutions
524
157
-
-
-
-
681
At FVOCI
-
506
712
2,196
2,770
-
6,184
At FVTPL
Loans and advances to customers
-
1
-
16
42
-
59
Derivatives
3
92
10
25
5
-
135
Other
-
-
-
-
-
2
2
Total financial assets
11,468
3,527
1,656
8,544
58,393
6,508
90,096
Financial liabilities
Financial instruments
At amortised cost
Customer deposits
40,567
4,368
15,195
6,697
-
-
66,827
Debt securities in issue
-
441
1,441
7,837
-
-
9,719
Due to other banks and similar institutions
226
393
550
5,900
-
-
7,069
At FVTPL
Derivatives
2
22
45
196
25
-
290
Total financial liabilities
40,795
5,224
17,231
20,630
25
-
83,905
Off balance sheet items
Financial guarantees
-
12
18
9
40
-
79
Other credit commitments
17,921
-
-
-
-
-
17,921
Total off-balance sheet items
17,921
12
18
9
40
-
18,000
(1)
The analysis excludes certain financial assets and liabilities relating to accruals, trade payables and settlement balances which are generally short-
term in nature and lease liabilities.
(2)
The prior year has been restated following the alignment of the Group’s accounting policies and presentation basis with Nationwide. Refer to note 1.7
for further details.
(3)
The no specified maturity within loans and advances to customers relates to credit cards.
62
Risk report (continued)
Financial risk (continued)
Funding and liquidity risk (continued)
Cash flows payable under financial liabilities by contractual maturity (audited)(1)
3 months
or less
3 to 12
months
1 to 5
years
Over 5
years
No
specified
maturity
Group
Call
Total
31 March 2025
£m
£m
£m
£m
£m
£m
£m
Financial liabilities
Financial instruments
At amortised cost
Customer deposits
47,270
7,541
14,665
1,396
-
-
70,872
Debt securities in issue
-
519
2,242
8,042
-
-
10,803
Due to other banks and similar
institutions
36
10
39
933
-
-
1,018
At FVTPL
Trading derivatives
-
6
11
15
6
-
38
Hedging derivatives
Contractual amounts payable
-
12
101
2,179
-
-
2,292
Contractual amounts receivable
-
(10)
(45)
(2,051)
-
-
(2,106)
Total financial liabilities
47,306
8,078
17,013
10,514
6
-
82,917
3 months
or less
3 to 12
months
1 to 5
years
Over 5
years
No
specified
maturity
Group
Call
Total
30 September 2023 restated(2)
£m
£m
£m
£m
£m
£m
£m
Financial liabilities
Financial instruments
At amortised cost
Customer deposits
40,567
4,384
15,647
6,874
-
-
67,472
Debt securities in issue
-
510
1,744
9,036
-
-
11,290
Due to other banks and similar
institutions
226
399
837
6,304
-
-
7,766
At FVTPL
Trading derivatives
-
16
29
37
8
-
90
Hedging derivatives
Contractual amounts payable
-
65
556
1,668
-
-
2,289
Contractual amounts receivable
-
(21)
(463)
(1,500)
-
-
(1,984)
Total financial liabilities
40,793
5,353
18,350
22,419
8
-
86,923
(1)
The analysis excludes certain liabilities relating to accruals, trade payables and settlement balances which are generally short-term in nature and lease
liabilities.
(2)
The prior year has been restated following the alignment of the Group’s accounting policies and presentation basis with Nationwide. Refer to note 1.7
for further details.
The balances in the cash flow table above do not agree directly to the balances in the balance sheet or the assets and liabilities
by maturity table presented above, as the table incorporates all cash flows, on an undiscounted basis, related to both principal
and future coupon payments.
Analysis of debt securities in issue by residual maturity
The table below shows the residual maturity of the Group’s debt securities in issue:
3 months
or less
£m
3 to 12
months
£m
1 to 5
years
£m
Over 5
years
£m
Total
31 Mar 2025
£m
Total
30 Sep 2023
£m
Covered bonds
44
759
3,609
-
4,412
4,415
Securitisation
59
237
1,849
-
2,145
1,740
Medium-term notes
360
504
1,746
-
2,610
2,612
Subordinated debt
7
461
286
-
754
952
Total debt securities in issue
470
1,961
7,490
-
9,921
9,719
Of which issued by Virgin Money UK PLC
367
965
2,032
-
3,364
3,564
63
Risk report (continued)
Financial risk (continued)
Funding and liquidity risk (continued)
External credit ratings
The Group’s long-term credit ratings are summarised below:
Outlook as at
As at
31 Mar 2025(1)
31 Mar 2025
30 Sep 2023
Virgin Money UK PLC
Moody’s
Stable
A3
Baa1
Fitch
Stable
A-
BBB+
Standard & Poor’s
Stable
BBB
BBB-
Clydesdale Bank PLC
Moody's(2)
Stable
A1
A3
Fitch
Stable
A-
A-
Standard & Poor's
Stable
A
A-
(1)
For detailed background on the latest credit opinion by Standard & Poor’s, Fitch and Moody’s, please refer to the respective rating agency website.
(2)
Long-term deposit rating.
Following the announcement of the potential acquisition by Nationwide in March 2024, the rating agencies in the table above
had announced potential positive changes to the Group’s credit ratings.
On 6 September 2024, following regulatory approval of the acquisition, Moody’s upgraded the long-term senior unsecured and
issuer ratings of the Group to A3 from Baa1 and Clydesdale Bank PLC’s long-term deposit rating to A1 from A3. These changes
reflect Moody's expectation that Nationwide will provide support to its new subsidiary in case of need and an expectation that
Nationwide and the Group will be resolved as a single unit in the case of failure. The outlook on the Group’s long-term issuer
and senior unsecured ratings, and the outlook on Clydesdale Bank PLC’s deposit rating are now Stable. This is in line with the
outlook on Nationwide’s long-term deposit and senior unsecured debt ratings and reflects Moody's view that the asset quality of
the newly combined Group will remain resilient, and capital will remain strong.
On 1 October 2024, following the completion of the acquisition, both S&P and Fitch announced positive rating and outlook
changes.
S&P upgraded the Group’s long-term issuer credit rating to BBB from BBB- and Clydesdale Bank PLC’s long-term issuer credit
rating to A from A-. This reflects S&P’s view of the Group’s status within the new Nationwide group as highly strategic and that
the Group will benefit from a higher-rated parent’s support. Following the rating actions, the outlook was changed to stable from
CreditWatch Positive, reflecting S&P's view that Nationwide will continue to deliver a resilient performance and maintain a
robust balance sheet, while mitigating the execution risks arising from the acquisition given the gradual integration timeline.
Fitch upgraded the Group’s long-term issuer default rating to A- from BBB+ and affirmed Clydesdale Bank PLC’s long-term
issuer default rating at A-. The upgrade to the Group’s rating reflects Fitch's view that the Group will benefit from a very high
likelihood of support from Nationwide, while execution risks are mitigated by transitional resolution arrangements and a
conservative and gradual integration process. Following the rating actions, the outlook was changed to Stable from Rating
Watch Positive, mirroring the outlook on Nationwide. Fitch reaffirmed their ratings in February 2025, noting the acquisition did
not have an immediate significant impact on the Group’s or Clydesdale Bank PLC’s standalone credit profiles and their Viability
Ratings were unaffected.
Market risk
Market risk is the risk of loss associated with adverse changes in the value of assets and liabilities held by the Group due to
movements in market factors such as foreign exchange risk, interest rates (duration risk), customer behaviour (optionality risk),
and the movement in rate spreads across types of assets or liabilities (basis risk and credit spread risk). The Group’s balance
sheet is predominantly UK-based and is denominated in GBP, therefore foreign exchange is not a material risk for the Group.
Any non-GBP denominated funding issuances and any foreign currency securities purchased are cross-currency swapped to
sterling for the term of the instrument.
Exposures
The Group does not have a trading book and therefore is only exposed to non-traded market risk. Market risk principally arises
through IRRBB, small foreign exchange exposure and the management of assets to support liquidity requirements, including
Credit Spread Risk in the Banking Book (CSRBB). It comprises the sensitivity of the Group’s current and future NII and
economic value to movements in market interest rates. The major contributors to interest rate risk are:
•
the mismatch, or duration, between repricing dates of interest-bearing assets and liabilities;
•
basis risk or assets and liabilities repricing to different reference rates, for example, customer asset and liability
products repricing against BoE base rate and Sterling Overnight Index Average (SONIA); and
•
customer optionality, for example the right to repay borrowing in advance of contractual maturity dates.
64
Risk report (continued)
Financial risk (continued)
Market risk (continued)
The focus of the Group’s activity is to provide high-quality banking services to its customers. These services include the
provision of foreign exchange risk management products and interest rate derivative products to enable customers to manage
risks within their businesses. As a subsidiary of Nationwide the Group is subject to The Building Societies Act and certain
restrictions on the provision of derivative products to customers. Due to these activities, the Group may be exposed to forms of
market risk that would arise from movements in the price on these products. These risks are monitored daily and are not a
material component of the Group’s risk profile. Controls and mitigation include the hedging of these products and the use of
natural offsets, in line with Group policies.
Measurement
IRRBB is measured, monitored, and managed from both an internal risk appetite and an external regulatory perspective. The
ERMF incorporates both market valuation and earnings-based approaches. In accordance with the Group IRRBB policy, risk
measurement techniques include: basis point sensitivity, NII sensitivity, VaR, changes in the economic value of equity (EVE),
interest rate risk stress testing, and scenario analysis.
The key features of the market risk management measurement approach are:
•
Basis point sensitivity analysis is performed daily and compares the potential impact of a one basis point (0.01%)
change on the present value of all future cash flows.
•
NII sensitivity assesses changes to earnings over a 12-month time horizon as a result of interest rate movements and
changes to customer behaviour.
•
VaR is measured on a statistical basis using a 99% confidence level based on daily rate movements over a ten-year
history set with a one-year holding period.
•
EVE is measured in line with the PRA Rulebook with all six interest rate shock scenarios assessed on a quarterly
basis, including customer optionality stresses. Reporting is performed including and excluding equity.
•
Static balance sheet (i.e. any new business is assumed to be matched, hedged or subject to immediate repricing).
•
Dynamic balance sheet (i.e. a balance sheet incorporating future business expectations, adjusted for the relevant
scenario in a consistent manner).
•
Run-off balance sheet (i.e. existing assets and liabilities not replaced as they mature, except to the extent necessary to
fund the remaining balance sheet).
•
Investment term for capital is modelled with a benchmark term agreed by ALCO.
•
Investment term for core non-interest-bearing assets and liabilities is modelled on a behavioural basis with a
benchmark term agreed by ALCO.
•
Assumptions covering the behavioural life of products and customer behaviour for optionality are reviewed and
approved by ALCO.
•
Structural hedging, used to reduce earnings volatility, is based on analysis approved by ALCO and Board.
•
CSRBB is assessed through VaR applied to the Group’s liquid asset buffer portfolio. CSRBB is measured at a 99%
confidence level based on daily spread movements over a ten-year history set with a three-month holding period.
•
Foreign exchange risk is assessed based on the absolute exposure to each currency.
•
IRRBB is fully integrated in the Group’s Internal Capital Adequacy Assessment Process (ICAAP).
Mitigation
Market risks are overseen by ALCO with delegation for day-to-day management given to Treasury. Treasury uses a number of
techniques and products to manage market risks including interest rate swaps, cash flow netting and foreign exchange
derivatives. The Group uses derivative financial instruments to manage its exposures within approved limits and not for
speculative purposes. The Group elects to apply hedge accounting for the majority of its risk management activity that uses
derivatives. Certain derivatives are designated as either fair value hedge or cash flow hedge:
Fair value hedges – the Group hedges part of its existing interest rate risk, resulting from potential movements in the fair value
of fixed rate assets and liabilities. The fair value of these swaps is disclosed within note 3.1.3.1 to the Group’s consolidated
financial statements. There were no transactions for which fair value hedge accounting had to be discontinued in the period as
a result of ineffectiveness.
Cash flow hedges – the Group hedges a portion of the variability in future cash flows attributable to interest rate risk. The
interest risk arises from variable interest rate assets and liabilities which are hedged using interest rate swaps. There were no
transactions for which cash flow hedge accounting had to be discontinued in the period as a result of the highly probable cash
flows no longer being expected to occur. The fair value of derivatives is disclosed within note 3.1.3.1 to the Group’s consolidated
financial statements.
65
Risk report (continued)
Financial risk (continued)
Market risk (continued)
Monitoring
Parameters and assumptions of models that are used in market risk monitoring are reviewed and updated on at least an annual
basis. Material changes require the approval of ALCO. Oversight of market risk is conducted by Risk which is independent of
the Treasury function. The Board and Executive Risk Committee, through ALCO’s oversight, monitor risk to ensure it remains
within approved policy limits and Board requirements.
Duration risk
Credit spread
31 Mar 2025
30 Sep 2023
31 Mar 2025
30 Sep 2023
Value at Risk (audited)
£m
£m
£m
£m
As at period end
14
27
69
62
Average value during the period
14
16
66
55
Minimum value during the period
2
4
63
44
Maximum value during the period
36
28
69
62
Net interest income (audited)
Earnings sensitivity measures calculate the change in NII over a 12-month period resulting from an instantaneous and parallel
change in interest rates. +/-25 basis point shocks and +/-100 basis point shocks represent the primary NII sensitivities assessed
internally.
12 months NII sensitivity
31 Mar 2025
£m
30 Sep 2023
£m
+25 basis point parallel shift
15
11
+100 basis point parallel shift
59
42
-25 basis point parallel shift
(20)
(11)
-100 basis point parallel shift
(82)
(45)
Sensitivities disclosed reflect the expected mechanical response to a movement in rates and represent a prudent outcome. The
sensitivities are indicative only and should not be viewed as a forecast.
The key assumptions and limitations are outlined below:
•
The sensitivities are calculated based on a static balance sheet and it is assumed there is no change to margins on
reinvestment of maturing fixed rate products.
•
There are no changes to basis spreads with the rate change passed on in full to all interest rate bases.
•
Administered rate products receive a rate pass on in line with internal scenario specific pass on assumptions. Any rate
reduction in a rate fall scenario is subject to product floors with the assumption customer rates would not go negative.
•
Additional commercial pricing responses and management actions are not included.
•
While in practice hedging strategy would be reviewed in light of changing market conditions, the sensitivities assume
no changes over the 12-month period.
66
Risk report (continued)
Financial risk (continued)
Market risk (continued)
Market risk linkage to the balance sheet (audited)
The following table shows the Group’s principal market risks, linked to the balance sheet assets and liabilities.
31 Mar 2025
£m
30 Sep 2023
£m
Interest
rate
duration
Credit
Spread
Foreign
Exchange
Optionality
Basis
Restated(1)
Assets
Financial instruments
At amortised cost
Loans and advances to customers
71,072
72,245
⚫
⚫
⚫
⚫
Fair value adjustment for portfolio
hedged risk
(116)
(492)
⚫
⚫
Cash and balances with central
banks
10,882
11,282
⚫
⚫
Due from other banks and similar
institutions
371
681
⚫
⚫
⚫
At FVOCI
6,197
6,184
⚫
⚫
⚫
⚫
At FVTPL
Loans and advances to customers
47
59
⚫
⚫
⚫
⚫
Derivatives
48
135
⚫
⚫
⚫
Other
2
2
⚫
⚫
Other assets
1,294
1,335
⚫
⚫
Total assets
89,797
91,431
Liabilities
Financial instruments
At amortised cost
Customer deposits
70,383
66,827
⚫
⚫
⚫
⚫
Debt securities in issue
9,921
9,719
⚫
⚫
⚫
Due to other banks and similar
institutions
956
7,069
⚫
⚫
⚫
At FVTPL
Derivatives
132
290
⚫
⚫
⚫
Other liabilities
2,854
2,274
⚫
⚫
Total liabilities
84,246
86,179
(1)
The prior year has been restated following the alignment of the Group’s accounting policies and presentation basis with Nationwide. Refer to note 1.7
for further details.
67
Risk report (continued)
Financial risk (continued)
Market risk (continued)
Structural hedge
The Group operates a structural hedging programme to manage interest rate risk on rate insensitive balances. The structural
hedge is used to mitigate any volatility in the prevailing rate environment by smoothing NII.
LIBOR replacement
All regulatory milestones in relation to LIBOR cessation have been met and there are no conduct issues to note.
At 31 March 2025, the Group holds no LIBOR exposure, in any currency, on the balance sheet (30 September 2023: £0.9m
remained on three-month GBP synthetic LIBOR).
Pension risk
The Group operates a defined benefit pension scheme, the Yorkshire and Clydesdale Bank Pension Scheme (the Scheme).
The Bank is the Scheme’s principal employer and there are no other participating employers. The Scheme was closed to future
accrual on 1 August 2017 for most members. A small number of members remain on a defined benefit accruals basis subject
to certain conditions.
Under a defined benefit pension scheme, the economic benefit an employee receives in retirement is determined by factors
such as salary and length of service but is not tied to the employee’s or the employer’s contributions, or the performance of the
scheme’s assets. A defined benefit pension scheme is exposed to market risk drivers such as interest rate risk, inflation risk,
equity risk, as well as risks pertaining to the life expectancy of scheme members (longevity risk) and to changes in the
legislation and regulatory requirements.
Pension risk is the risk that, at any point in time, the value of the Scheme’s assets is not enough to meet the Scheme’s
estimated liabilities. This risk will continue to exist until the Scheme is formally wound up, either if all the liabilities are
transferred to a third party (for example an insurer) or once all individual member benefits have been honoured. Pension risk
can negatively impact the Group’s capital position.
The Group also supports a defined contribution scheme. Defined contribution schemes do not give rise to pension risk, as the
employer has no legal or constructive obligation to make further contributions if the defined contribution scheme’s assets are
insufficient to pay all member benefits. Risks, including market, investment performance and longevity risks, are borne by the
employee rather than the Group.
Risk appetite
The Group’s pension risk appetite is a component of the Group-wide framework for the management of balance sheet risks.
Pension risk may adversely impact the Group’s capital position. The Group is required to hold capital against it and may be
required to make further contributions. Consequently, pension risk is considered in the context of potential capital impacts to the
Group, due to changes in the valuations of the Scheme’s liabilities and assets.
68
Risk report (continued)
Financial risk (continued)
Pension risk (continued)
Liabilities
The defined benefit obligation is a series of future cash flows, with relatively long duration. It is estimated by independent
actuaries using the projected unit credit method. The actual cost of the Scheme can only be known after the Scheme is formally
wound up.
On an IAS 19 basis, the defined benefit obligation present value is calculated by discounting the series of future cash flow
estimates using a discount rate linked to yields of high-quality corporate bonds, of a duration aligned to that of the Scheme’s
liabilities. The cash flows and valuation are primarily sensitive to changes in corporate bond credit spreads, long-term inflation
rates and the life expectancy of members. There is a risk that the value of the Scheme’s liabilities is higher than that of its
assets. In particular:
•
an increase in the discount rate corresponds to a decrease in liabilities;
•
an increase in long-term expected inflation corresponds to an increase in liabilities; and
•
an increase in life expectancy corresponds to an increase in liabilities.
The impact of these actuarial assumptions on valuations will also depend on investment and de-risking decisions (including
interest rate, inflation rate and longevity hedging) made by the Trustee, as well as by the inflationary caps within the terms of the
Scheme. Nevertheless, material changes to the key actuarial assumptions or changes to the methodology by which they are
derived may lead to volatility in the Group’s IAS 19 position. In line with pensions legislation, a formal actuarial valuation
(Triennial Valuation) of the Scheme’s assets and liabilities takes place at least every three years by independent actuaries.
More information on the Scheme’s defined benefit obligations is shown within note 3.3 of the Group’s consolidated financial
statements. The present value of the liabilities was £2,236m as at 31 March 2025 (30 September 2023: £2,284m).
Assets
The Scheme’s assets are held separately from the Group’s assets and are administered by a board of trustees (the Trustee).
The Trustee has fiduciary responsibilities to the Scheme’s members and governs investments according to a Statement of
Investment Principles (SIP). The SIP is reviewed and agreed by the Trustee on a regular basis, with the Group consulted on
any proposed changes. The SIP sets out the Scheme objectives and the path to meet these objectives and is drafted
in accordance with the requirements of Section 35 of the Pensions Act 1995 (as amended by the Pensions Act 2004 and
regulations made under it). This results in the Scheme holding an appropriate mix of assets to better match future pension
obligations.
There is a risk that the value of the Scheme’s assets is lower than the present value of its liabilities. In particular, total asset
returns lower than the discount rate used in the calculation of the present value of the defined benefit obligations may have an
adverse impact on the Group’s IAS 19 position.
The split of Scheme assets is shown within note 3.3 of the Group’s consolidated financial statements. The fair value of the
assets was £2,593m as at 31 March 2025 (30 September 2023: £2,796m).
Within the Scheme’s matching assets there is a Liability Driven Investment (LDI) portfolio, which consists of both physical
assets and derivatives. The Scheme uses a bespoke, segregated strategy which reflects, as far as possible, the specifics of the
Scheme’s liabilities in terms of exposure to movements in interest rates and inflation. As at 31 March 2025, the LDI portfolio
was valued at £936m (30 September 2023: £1,038m).
LDI portfolios are commonly used by defined benefit pension schemes to better match their assets to their liabilities, while
retaining their allocations to return-seeking assets. For example, falling interest rates or rising inflation would typically increase
the value of a scheme’s liabilities but the value of the LDI portfolio would also increase commensurably, hence reducing the
scheme’s funding level volatility. LDI utilises financial instruments, including derivatives, which require the scheme to provide
collateral to counterparties. This generates additional liquidity risks and requirements as these collateral demands can change
over periods when rates change. The Scheme needs to ensure that it has sufficient liquidity to meet any such obligation.
69
Risk report (continued)
Financial risk (continued)
Pension risk (continued)
As at 31 March 2025, the Scheme is still estimated to have substantial collateral headroom to meet further rises in interest rates
of more than 6% (30 September 2023: 10%).
The uncommitted facility of £75m, granted by the Group in 2023 to replace the previous contingent security arrangement,
remains in place. As at 31 March 2025 the amount drawn under the facility was £Nil (30 September 2023: £Nil).
Exposure
The Group’s defined benefit pension scheme affects its regulatory capital in two ways:
•
CET1 capital – an IAS 19 surplus increases the Group’s balance sheet assets and reserves. However, any such
amount is not recognised for the purposes of determining CET1 capital. An IAS 19 deficit on the other hand, which
increases balance sheet liabilities and reduces reserves, is recognised for regulatory capital purposes, and so will
decrease CET1 capital.
•
Pillar 2A capital – the Group is also required to determine the level of capital required to be held under Pillar 2A for
pension obligation risk as part of the annual ICAAP process. This requirement forms part of the Group’s regulatory
Total Capital Requirement.
Mitigation
The Trustee and Group have had a common view of the Scheme’s long-term strategic aims, encapsulated by an agreed de-
risking journey plan. This has included a long-term self-sufficiency funding target (i.e. the point in time when the Scheme would
no longer need to call on the Bank for additional funding) with assumptions as to how this target is expected to be managed,
monitored and met. Potential actions to address deviations in the actual funding level relative to the journey plan have also
been considered.
In addition to the Scheme being closed to new members and closed to future accrual for the majority of members, additional
measures have been implemented by the Group and Trustee with the specific aim of reducing risks. This includes hedging
against interest rate and inflation risk. On 6 April 2023, the Scheme executed a longevity swap transaction to manage longevity
risk in relation to c.£1,600m of pensioner liabilities. Cost-effective options to further reduce risk within the Scheme will continue
to be assessed.
Monitoring
Information on the Scheme’s current valuations, asset holdings and discount and inflation rate assumptions are presented to
ALCO. This also includes monitoring of the performance of the LDI portfolio as well as of the collateral headroom. The impact of
the Scheme on the Group is also subject to risk oversight from the Risk function. In addition, semi-annual pension risk updates
are provided to the Board Risk Committee.
Performance of the Scheme’s asset portfolio against the various risk metrics is monitored by the Scheme investment adviser
and reported to the Investment Sub Committee, which includes Group representation, and Trustee Board on a quarterly basis.
The Scheme’s de-risking plan has delivered resilience to stress testing and continued improvements in Group and Trustee
valuations. The IAS 19 position continues to be assessed in the Group’s ICAAP and regulatory stress testing processes.
The triennial valuation with an effective date of 30 September 2022, showed a funding surplus. Consequently, no further
contributions from the Group were required and there was no capital impact. The effective date of the Scheme’s next triennial
valuation is 30 September 2025.
70
Risk report (continued)
Model risk
Model risk is defined as the potential for adverse consequences from decisions based on incorrect or misused model outputs
and reports.
The Group’s definition of a model is a quantitative method, system, or approach that applies statistical, economic, financial, or
mathematical theories, techniques, and assumptions to process input data into output that generates or supports decisions that
impact customers directly or indirectly. This also includes input data that is quantitative and/or qualitative in nature or expert
judgement-based, and output that is quantitative or qualitative.
The use of models invariably presents model risk, which is defined as the potential for adverse consequences from decisions
based on incorrect or misused model outputs and reports.
Model risk increases with greater model complexity, higher uncertainty around inputs and assumptions, broader use, and larger
potential impact. If left unmitigated, model risk can lead to poor decision making, misreporting or a failure to identify risks.
Risk appetite
In delivering its strategic objectives, the Group accepts that a level of loss may arise from model error. Key controls are in place
at all stages of the model lifecycle. Model risk is a principal risk and risk appetite metrics focus on model effectiveness and the
outcomes of performance monitoring and independent validations on the Group’s most material models.
Exposures
To enable senior management to gauge and manage model risk, each model is classified into tiers, based on materiality and
complexity (aligned to SS1/23 Model Risk Management Principles). This allows a proportionate application of the Model Risk
Management framework, including the level of approval and frequency/depth of validation expected.
The Group’s model inventory contains information on all models and supports the prioritisation of business activities and
informs senior management of the status of models.
Measurement
The Board delegates authority to MGC to ensure that model risk is being managed through the model risk management policy.
Model risk is measured through risk appetite reporting and regular model MI to Board Risk Committee and MGC.
The Chief Risk Officer has been identified as the appropriate Senior Management Function role and the overall responsibility for
the Model Risk Management framework, its implementation, execution and maintenance has been delegated to the Chief Model
Risk Officer.
Mitigation
The Group has a comprehensive model risk policy framework in place. The model risk management policy defines model risk
management roles and responsibilities supported by supplementary frameworks and standards that prescribe how model risk is
to be managed across the full model lifecycle (including development, validation, approval, implementation and use/mitigation).
The Independent Model Validation function conducts validations when a new model is developed or changed, and on a periodic
basis. The function assists with identifying model weaknesses and raises mitigating actions. If significant model deficiencies
and/or errors are identified, the relevant model approval authority will consider whether the use of models should be limited or
requires additional mitigation.
Monitoring
The Group conducts periodic monitoring of model performance to ensure models remain fit for purpose and to ensure model
assumptions remain valid. The frequency of model monitoring is commensurate with the nature and materiality of the models
and risks, with due consideration given to model complexity, in line with the relevant monitoring standards.
71
Risk report (continued)
Regulatory and compliance risk
Regulatory and compliance risk is the risk of failing to comply with relevant regulatory requirements and changes in the
regulatory environment, failing to manage legal risks effectively, or failing to manage a constructive relationship with our
regulators by not keeping them informed of relevant issues, not responding effectively to information requests or not meeting
regulatory deadlines.
Risk appetite
The Group has no appetite for actions which result in breaches of regulation or for inaction to address systemic process and
control failures leading to material non-compliance. The Group seeks to ensure that all mandatory requirements are prioritised
for implementation within the required timescales with due consideration for mitigation of potential customer harm. The Group
has an open dialogue with regulators, escalating all issues of which they would reasonably expect to be made aware.
Exposures
The Group remains exposed to regulatory and compliance risk from ongoing and new regulatory developments. This is
expected to persist as consumer and regulatory expectations continue to rise, and as the regulatory environment responds to
external factors, including macroeconomic conditions and associated cost of living pressures.
Measurement
Regulatory and compliance risks are measured against a defined set of Board-approved risk appetite metrics relating to the
status of regulatory compliance and regulatory implementations. Thresholds are set and form part of the Board-approved risk
appetite.
Mitigation
The following controls and procedures help to mitigate regulatory and compliance risk:
•
clearly defined regulatory and compliance policy framework requirements, associated policies and Board-approved risk
appetite;
•
ongoing development, maintenance and reporting of risk appetite measures for regulatory and compliance risk to the
Executive Risk Committee, the Board Risk Committee and the Board;
•
maintenance of proactive and coordinated engagement with the Group’s key regulators;
•
continual assessment of evolving regulatory requirements, including regulatory business plans and thematic reviews;
•
oversight of regulatory and compliance risks and issues in relevant governance bodies;
•
consideration of regulatory requirements in product and proposition development;
•
operation of the Consumer Duty framework;
•
ongoing review and tracking of known regulatory and compliance issues and remediation actions being taken; and
•
a risk-based monitoring framework, designed to monitor compliance with regulation and assess customer outcomes.
Monitoring
Regulatory and compliance risk is considered by all three lines of defence as part of their oversight and monitoring activities. A
risk assurance plan, approved by the Board Risk Committee on an annual basis, independently assesses areas of the control
framework underpinning compliance with relevant laws and regulations.
72
Risk report (continued)
Conduct risk
Conduct risk is the risk of undertaking business in a way which fails to deliver good customer outcomes in line with the FCA’s
Consumer Duty and causes customer harm, and may result in regulatory censure, redress costs and/or reputational damage.
Risk appetite
The Group is committed to delivering good outcomes for its customers, including its vulnerable customers and has a low
appetite for conduct risk.
Exposures
The Group remains exposed to conduct risk in the course of its provision of services and products to customers, including those
risks arising as the Group and its customers adapt to an increasingly digital world, and as customer vulnerabilities, expectations
and behaviours evolve alongside the external environment and economic conditions. The FCA’s new Consumer Duty, sets a
higher standard for conduct and the level of expectation in delivering good outcomes to our customers, which has been
introduced into the bank’s risk and operating framework.
Measurement
Conduct risks are measured against a defined set of Board-approved risk appetite metrics, with an emphasis on delivering good
customer outcomes.
Mitigation
The following controls and procedures help to mitigate conduct risk:
•
clearly defined conduct risk policy framework requirements, associated policies and Board- approved risk appetite;
•
ongoing development, maintenance and reporting of conduct risk appetite measures to the Executive Risk Committee,
the Board Risk Committee and the Board;
•
operation of the Consumer Duty framework;
•
consideration of conduct risk in product and proposition development;
•
regular management review of conduct reporting, centred on core product areas and aligned to relevant businesses;
•
analysis of customer experience data and complaint handling;
•
continuing development of a customer-centric culture aligned to the Group’s Purpose;
•
a focus on colleague training and careful management of colleagues’ performance to support good customer outcomes;
•
ongoing review and tracking of known conduct issues and remediation actions being taken; and
•
a risk-based monitoring framework, designed to monitor compliance with regulation and assess customer outcomes.
Monitoring
All three lines of defence consider conduct risk as part of their oversight and monitoring activities. A risk assurance plan,
approved annually by the Board Risk Committee, independently assesses the control framework underpinning the Group’s
conduct risk management and the delivery of good customer outcomes.
73
Risk report (continued)
Operational risk
Operational risk is the risk of loss or customer harm resulting from inadequate or failed internal processes, people and systems
or from external events, incorporating the inability to maintain critical services, recover quickly and learn from
unexpected/adverse events. Operational risk includes: change risk; third-party risk; cyber and information security risk; physical
and personal security risk; IT resilience risk; data management risk; payment creation, execution and settlement risk; and
people risk.
It is a core component of the ERMF and is embedded in day-to-day business activities focused on enabling operational
efficiencies. Requirements and responsibilities are set out in the operational risk policy statement and supporting operational
risk framework policy standard that seeks to identify, assess, mitigate, monitor, and report the operational risks, events and
issues that could impact the achievement of business objectives or impact core business processes.
Business units are responsible for the day-to-day management of operational risk, with oversight from the Risk function, and
independent assurance activities undertaken by Internal Audit. A new Non-Financial Risk Committee has been established to
provide oversight of the Group’s non-financial risks, risk appetite, policy compliance and ERMF and to better support the
Executive Risk Committee.
Operational resilience is an outcome that benefits from the effective management of operational risk. Activities in this 18-month
period have seen the identification and mapping of our Important Business Services and setting of impact tolerances. Ongoing
work will further refine mapping activity and stress testing requirements.
Risk appetite
The Group is prepared to tolerate a level of operational risk exposure within agreed thresholds and limits. A level of resilience
risk from internal and external events is tolerated, however, immediate steps are taken to minimise customer disruption through
recovery within defined timelines.
Exposures
Operational risks arise from day-to-day business activities, which may result in direct or indirect losses and could adversely
impact the Group’s financial performance, levels of customer care or reputation. The Group strives to deliver operational
efficiency in the implementation of its objectives and accepts that a level of loss may arise from operational failure. Implementing
key controls and monitoring ensures that risks are managed, and losses remain within acceptable limits.
The Group’s exposure to operational risk is impacted through the need to engage with innovative, dynamic third parties; deliver
new products and services; and make effective use of reliable data in a changing external environment, to deliver on the
Group’s strategic objectives. Alongside ongoing risk and control monitoring, operational and resilience risk oversight is focused
on the following key areas:
Risk category
Change risk
The risks associated with a failure to execute and deliver change that could result in an inability to
meet our strategic objectives, including failing to meet our customer, regulator, colleague, or
shareholder expectations, at a Group and local management level.
How this risk is managed - The Group uses a single integrated change governance framework which
covers all levels of change management to ensure appropriate oversight and decision making across
the change portfolio. As part of this, a centralised view of significant and material change is
maintained. This approach ensures that the risks of individual changes are managed effectively and
that change is prioritised to minimise the overall risks to the organisation in line with risk appetite.
Third-party risk
The risks associated with ensuring the Group’s outsourced and offshoring arrangements are
controlled more effectively, including the risk of failure to service existing and new customers; the
potential cessation of specific activities; the risk of personally identifiable information or Group
sensitive data being exposed or exploited; and the risk of financial, reputational and regulatory
censure if the third party enters into any illegal or unethical activities.
How this risk is managed - The Group continues to enhance its third-party ERMF and oversight
approach, with ongoing performance management and assurance undertaken, to ensure that
supplier relationships are controlled effectively.
74
Risk report (continued)
Operational risk (continued)
Risk category
Cyber and
information
security risk
The risks arising from inadequate internal and external information and cyber security, where
failures impact the confidentiality, integrity and availability of electronic data.
How this risk is managed – We maintain robust cyber and information security policies, and
controls are in place and operating, with assurance carried out as a matter of course. This includes
threat intelligence, education and awareness, and assurance of controls within the Group and our
third parties. Our Security Operations Centre provides 24/7 monitoring and alerting in order that
any security threats are quickly detected and addressed.
Physical and
personal security risk
The risk to the safety and protection of colleagues, customers and physical assets arising from
unauthorised access to buildings, theft, robbery, intimidation, blackmail, sabotage, terrorism and
other physical security risks.
How this risk is managed – Physical and personal security standards are managed by the Group’s
Property and Procurement team. Controls are in place to protect physical assets, as well as the
security of colleagues and customers.
IT resilience risk
The Group’s ability to adapt to disruptions while maintaining continuous operations on critical
processes and safeguarding technology in the face of adverse events, chronic disruptions or
incremental changes. The Group recognises the significant regulatory focus on resilience with
increased reliance on digital banking, remote working, and use of third-party and cloud solutions.
How this risk is managed – The Group is well placed to respond to new regulations and standards
and develops technology with resilience inbuilt as a principle. A programme of continuous
monitoring and maintenance of the currency of the technology estates, alongside disaster recovery
testing, helps to minimise the likelihood of system failure. The Group maintains and tests critical
end-to-end business recovery and contingency plans in the event that there is a system outage.
Payment creation,
execution and
settlement risk
(included under
inadequate or failed
process design and
execution)
The risk that transactions are not conducted in line with the instructions and parameters of a
customer’s payment, trading, clearing, settlement scheme or business requirements. This could
lead to delays, inaccuracies, duplicates, failures or rejections as well as system-based restrictions
and errors. The payments industry continues to experience regulatory change, with the publication
of the UK National Payments Vision and the ongoing implementation of ISO20022.
How this risk is managed – The payment risk framework outlines key scheme rules, regulations
and compliance requirements alongside the risk-based approach to assurance oversight, control
testing and change management, to ensure payment risk is managed within appetite and impact to
customers is minimised. All three lines of defence are actively involved in changes being made.
Data management
Data underpins decision making at all levels of the organisation. Poor-quality data can lead to loss,
customer disruption, potential misrepresentation in regulatory reporting, non-compliance with Data
GDPR and unnecessary rework.
How this risk is managed – The Group has a data management framework governing the creation,
storage, distribution, usage and retirement of data, aligned with data management industry
standards and GDPR requirements.
People risk
People risk is defined as the risk of not having sufficiently skilled and motivated colleagues who
are clear on their responsibilities and accountabilities and who behave in an ethical way. This could
lead to inappropriate decision making that is detrimental to customers or colleagues and could
ultimately lead to regulatory sanction.
How this risk is managed – The Group has a range of RAS metrics in place which help to measure
and report people risk. Operational controls are designed to mitigate the risks associated
throughout each element of the colleague life cycle. Group-wide systems provide tools and online
guidance to all colleagues to support them in discharging their accountabilities.
75
Risk report (continued)
Operational risk (continued)
Measurement
Material operational risk events are identified, reviewed and escalated in line with criteria set out in the ERMF. Root cause
analysis is undertaken and action plans are implemented.
Losses may result from both internal and external events and are categorised using risk categories aligned to Basel II. The
Basel II categories are used to ensure that data can be reported externally and compared with other industry data. Due to the
nature of risk events, losses and recoveries can take time to crystallise and therefore may be restated for prior or subsequent
financial years.
Operational risk losses
The majority of losses relate to two Basel categories: ‘External fraud’ and ‘Execution, delivery and process management.’ The
volume of External fraud losses accounted for 95% of the total. This category’s higher volume of low-value events relates
mainly to card fraud and online scams and is in line with the industry. ‘Execution, delivery and process management’ volumes
are as expected and reflect the daily volume of transactions and customer interactions.
The table below outlines the operational risk losses by Basel category.
% of total volume
% of total losses
Operational risk losses by Basel category(1)(2)
31 Mar 2025
30 Sep 2023
31 Mar 2025
30 Sep 2023
Business disruption and system failures
0.1%
0.1%
0.0%
0.1%
Clients, products and business practices
0.8%
0.9%
2.4%
1.8%
Damage to physical assets
0.1%
0.4%
0.0%
0.3%
Execution, delivery and process management
4.4%
3.1%
5.7%
3.0%
External fraud
94.6%
95.6%
91.8%
94.8%
Internal fraud
0.1%
0.0%
0.0%
0.0%
(1) Losses greater than or equal to £5,000, excluding unexpected losses. Loss amounts can change as a result of a recovery / additional loss.
(2) Figures may not match those presented previously for 30 September 2023 as historical loss amounts can change due to recoveries made.
Mitigation
In delivering its strategic objectives, the Group strives for operational efficiency and accepts a level of loss may arise from
operational failure. Implementing key controls and monitoring, with appropriate escalation and governance, ensures operational
risks are managed, and losses remain within acceptable limits. We operate robust controls over all significant operational risks
and ensure these are sufficient to prevent material disruption of our service to customers and/or our business.
The Group manages a multiyear programme of investment to upgrade propositions and to deliver key change initiatives, across
areas such as cyber security and data management. Delivering change sustainably and managing execution risk is a priority for
the Group.
Monitoring
The Group has identified, assessed and monitored all key operational and resilience risks across the noted Basel II categories,
including undertaking an assessment of control effectiveness, monitoring trends in key risk indicators and escalating events, in
accordance with policy requirements. The Risk function performs oversight of the Group’s business planning process, including
analysis of industry trends or forward-looking threats that could lead to material impact on our ability to deliver on the strategic
objectives or result in a significant impact on assessment of operational risk capital. It also performs ongoing oversight of the
Group’s management of operational risk, including risk and control assessment, issues and risk events.
Stress testing
The Group develops and maintains a suite of operational risk scenarios using internal and external data. These scenarios
provide insights into the stresses the business could be subject to given extreme circumstances. Scenarios cover all material
operational risks including execution of change, failures in core processes or execution risk from a third party. Scenarios are
owned by senior management custodians with review and challenge provided by the Risk function, Executive Risk Committee
and Board Risk Committee, as part of the ICAAP process. Management actions are agreed and monitored and linked with
business resilience and continuity testing where appropriate.
76
Risk report (continued)
Economic crime risk
Economic crime risk is the risk that the Group fails to detect and prevent its products and services from being used to facilitate
economic crime, resulting in harm to customers, the Group and its reputation, or third parties. This includes money laundering,
terrorist financing, facilitation of tax evasion, sanctions, fraud, and bribery and corruption.
Risk appetite
Economic crime risk is measured and reported against a defined suite of metrics within the Group risk appetite. In particular:
Money laundering and terrorist financing
The Group has no risk appetite for knowingly facilitating money laundering or terrorist financing. The Group does not tolerate
non-adherence with applicable laws, regulations, or supervisory requirements in relation to anti-money laundering and counter-
terrorist financing.
Proliferation financing
The Group has no risk appetite for non-compliance with the legal and regulatory obligations relative to proliferation financing.
Sanctions and violations
The Group has no risk appetite for conducting business which may breach sanctions legislation. If suspected breaches have
occurred, the Group are committed to ensuring reporting is completed to external authorities without delay and within regulatory
timescales. The Group has no risk appetite for non-compliance with the legal and regulatory obligations, or supervisory
requirements relative to sanctions and embargoes. The Group has no risk appetite for entering into a relationship with, or carry
out a transaction for, anyone who is sanctioned under UK, EU, UN or US sanctions regimes.
Bribery and corruption
The Group has no risk appetite for bribery or corruption committed within, against or for and on behalf of the Group, or by its
associated persons. The Group will not tolerate any instances of bribery and shall always seek as a minimum, to hold the
individual(s) responsible accountable, either by applying internal disciplinary procedures, assisting law enforcement with their
external investigations, or a combination of both.
Facilitation of tax evasion
The Group has no risk appetite for tax evasion committed within, against or for and on behalf of the Group, or by its associated
persons. The Group will not tolerate any instances of tax evasion and shall always seek as a minimum, to hold the individual(s)
responsible accountable, either by applying internal disciplinary procedures, assisting law enforcement with their external
investigations, or a combination of both.
Internal fraud
The Group has no appetite for internal fraud.
External fraud
For externally committed fraud, a risk appetite threshold may be set and mandated for each Group Business Unit. Group
Business Units are responsible for setting appropriate thresholds and monitoring their adherence to those thresholds. The
Group does not tolerate non-adherence with applicable laws, regulations, or supervisory requirements in relation to fraud.
Exposures
Economic crime risks are inherent in doing business in the financial services industry and may arise from failure to:
•
meet legal and regulatory requirements; and
•
maintain effective systems and controls to prevent the risk that the Group might be used to further financial crime.
Measurement
All economic crime standards are reflected in the Group policy and supporting standards, the content of which is provided by
the Economic Crime Risk team and updated as appropriate. Financial crime and fraud-related risk appetite metrics are
monitored and reported to the Board on a monthly basis.
77
Risk report (continued)
Economic crime risk (continued)
Mitigation
As a Tier 1 bank, we are proactively investing in financial crime and fraud prevention, in response to increasing public
expectations and to protect our customers and the bank. We are focused on ensuring we play our part in safeguarding the
financial sector and aim to continuously improve, whilst considering the rapidly evolving environment and expectations in the
UK and are mindful of the challenges several of our peers have experienced.
The Group has the following controls and procedures to support mitigation:
•
clearly defined economic crime policies1 (with supporting standards) and risk appetite signed off by the Board;
•
ongoing development, maintenance and reporting of risk appetite measures for economic crime risk to the Executive
Risk Committee and the Board;
•
key performance metrics relative to critical economic crime systems are kept under review and presented through
governance to assess ongoing effectiveness;
•
consideration of economic crime risk in the context of product and proposition development and associated appropriate
governance;
•
investment to maintain compliance and progress with key implementations;
•
ongoing assessment of evolving regulatory policy requirements and ensuring the Group responds accordingly; and
•
regular oversight and review of systems, controls, higher risk activities and customers takes place as part of a formal
oversight plan.
Monitoring
The three lines of defence play a key role in managing economic crime risk. This includes operational monitoring activities such
as: screening (PEPs, sanctions and adverse media) and due diligence; fraud detection and customer support processes;
independent oversight and risk monitoring of risk appetite and the effectiveness of the economic crime control framework;
governance and standard setting; training; and reporting to the competent authorities, as well as through internal governance
fora, such as Executive Risk Committee and the Board.
1 Anti-Money Laundering, Counter-Terrorist Financing, Counter-Proliferation Financing and Sanctions Policy, Fraud Prevention Policy, Anti-
Bribery and Corruption Policy, Prevention of Facilitation of Tax Evasion Policy
78
Risk report (continued)
Strategic and enterprise risk
Strategic and enterprise risk is the risk of significant loss of earnings or damage from decisions or actions that impact the long-
term interests of the Group’s stakeholders, or from an inability to fund or manage required change projects or adapt to external
developments.
Risk appetite
The risk position for strategic and enterprise risk, referenced in the Group’s RAS, requires that there is effective management
and oversight of the delivery of our business model, with effective cost management and optimisation of investment, and in all
cases, that effective governance is maintained. In the interest of pursuing our strategic ambitions, we actively monitor the
external environment and manage potential impacts and avoid activities which may cause significant reputational damage to the
Group and the wider Nationwide group.
Exposures
Instability in the geopolitical environment and macroeconomic pressures could impact customer resilience and consequently
debt affordability. The Group has considered this uncertainty and potential challenges as part of the Strategic and Financial
Plan risk assessment and planning process.
There is significant additional investment in technology and people, to support growth plans and strategic objectives. Given the
volume of change required to achieve our strategic priorities pre-existing execution risk is heightened, and the uncertainty in the
external environment further exacerbates this risk.
Measurement
The Group’s risk appetite represents a ‘risk envelope’ against which chosen strategies and financial plans are assessed and
within which chosen strategies must operate. Risk appetite is a key means of controlling strategic risk. The risk appetite
handbook comprises an extensive system of measures, thresholds and other controls, which together ensure that the Group
operates within the Board’s approved appetite for strategic risk.
There are clearly defined strategic milestones with associated exit criteria which, with the range of risk appetite metrics and
other key metrics established to measure associated risk, are regularly reviewed.
Mitigation
The Group undertakes thorough and regular monitoring of emerging and crystallised strategic risks, including developments in
the external geopolitical environment, to ensure it is best placed to proactively respond to changes as and when required.
Robust contingency plans are in place to ensure the impact of any changes on strategic initiatives is captured.
The Risk function undertakes regular risk oversight activity, placing customers’ interests at the centre of all aspects of change.
The strategic and financial planning process for project prioritisation is overseen by the Risk function to ensure a balanced
portfolio within the funding available.
Monitoring
A range of financial and non-financial metrics are used to monitor performance relative to strategic priorities. They are
continually monitored against the Strategic and Financial Plan by the Board and Executive Committee, who react to deviations
from targets and modify strategy accordingly.
A formal assessment of the Group’s Strategic and Financial Plan, reviewing the Group’s current and potential strategic risks,
and the impact of strategic decisions and objectives on the Group’s risk profile, was undertaken during the 18-month period. The
findings are reported to the Executive Committee and the Board annually.
79
Risk report (continued)
Climate risk
Climate risk is the exposures to physical and transition risks arising from climate change.
Risk appetite
We are committed to working towards alignment to a net zero pathway by 2050 and seek to minimise the impact of physical and
transition climate risk to the Group and its customers. The Group has developed initial capability to assess physical and
transition risk drivers in addition to running scenario analyses for its lending portfolios. However, the Group continues to evolve
its approach, enhancing tools and data solutions to support climate risk assessment, management and monitoring.
Exposures
Physical risks arise from longer-term changes in the climate and weather-related events e.g., rising average temperatures,
heatwaves, droughts, floods, storms, sea-level rise, coastal erosion and subsidence. They can potentially result in large financial
losses in respect of the Group’s own properties or disrupt operations as well as impairing asset values and the financial position
of borrowers or key third-party suppliers.
Transition risks arise from the adjustment towards a low-carbon economy and could lead to changes in appetite, strategy,
policy, technology, and sentiment. These changes could prompt a reassessment of the value of a large range of assets and
create increased financial exposures for the Group as the costs and opportunities arising from climate change become
apparent. Reputation risks may also arise from a failure to meet changing and more demanding societal, investor or regulatory
expectations.
Measurement
The Group has developed core climate change scenario analysis capability to enhance our ability to identify climate-related risks
and opportunities, and to assess the resilience of our business model.
Working with specialist third-party data providers the Group periodically assesses a range of physical and transition risk drivers
to identify potential impacts within the Group’s lending portfolio. The Group will continue to develop its approach and climate-
related data as climate risk methodologies and risk management practices evolve.
Mitigation
There is a specific climate risk policy which outlines the Group’s approach to the identification, management and monitoring of
climate risk. The policy clearly defines and documents roles and responsibilities across the Group.
Monitoring
Climate risk is monitored and reported on a regular basis in Executive and Board Committees. The Environment Committee
oversees the management of environmental and climate change matters across the Group and is chaired by the Chief Financial
Officer.
Periodic monitoring of metrics is undertaken against risk appetite, other key risk indicators and strategic Group objectives. The
Risk function provides oversight of the Group’s approach to monitor and mitigate climate risk.
80
Governance report
The Board
Board and committee composition and attendance at scheduled meetings from 1 October 2023 to 31 March 2025(1):
Board member
Board
Governance
and
Nomination
Committee
Audit
Committee
Risk
Committee
Remuneration
Committee
Independent
David Bennett (Board Chair)
C
15/15
C
5/5
-
-
M
10/11(2)
On appointment
Executive Directors
Chris Rhodes(3)
5/5
-
-
-
-
No
Gergely Zaborszky(3)
1/1
-
-
-
-
No
Non-Executive Directors
Lucinda Charles-Jones(3)
M
12/12
M
4/4
M
10/10
M
11/11
C
8/8
Yes
Tracey Graham(3)
M
2/2
M
1/1
-
-
-
Yes
Petra van Hoeken(3)
M
7/7
M
2/3(2)
M
7/7
C
8/8
M
5/6(2)
Yes
Elena Novokreshchenova
M
15/15
M
5/5
M
12/12
M
14/14
M
11/11
Yes
Tim Wade
M
15/15
M
5/5
C
12/12
M
14/14
M
11/11
Yes
Former Directors
David Duffy(4)
M
10/10
-
-
-
-
No
Clifford Abrahams(4)
M
12/13(2)
-
-
-
-
No
Geeta Gopalan(4)
M
8/8
M
2/2
M
5/5
C
6/6
M
5/5
Yes
Darren Pope(4)
M
10/10
M
4/4
M
7/7
M
8/8
C
7/7(2)
Yes
Sara Weller(4)
M
9/10(2)
M
3/4(2)
-
-
-
No
(1) Data is based on scheduled meetings from 1 October 2023 to 31 March 2025; ‘C’ indicates Chair of Board or Board Committee and ‘M’ indicates member of Board
or Board Committee. Includes additional joint meetings of the Board Audit Committee and Board Risk Committee.
(2) Unable to attend the meeting due to a prior unavoidable commitment.
(3) Lucinda Charles-Jones, Petra van Hoeken and Tracey Graham were appointed as Non-Executive Directors of the Board on 22 January 2024, 1 July 2024 and 23
January 2025 respectively. Chris Rhodes and Gergely Zaborszky were appointed as Executive Directors of the Board on 1 October 2024 and 4 March 2025
respectively.
(4) Geeta Gopalan stepped down from the Board on 30 June 2024. David Duffy, Darren Pope and Sara Weller stepped down from the Board on 1 October 2024.
Clifford Abrahams stepped down from the Board on 15 December 2024.
Changes to the Group board of directors (the Board) during the reporting period are explained in the ‘Board Composition and
Succession’ section on page 90. Directors’ biographies setting out skills, experience and key external appointments are
available on the Virgin Money’s website (www.virginmoneyukplc.com).
Statement of corporate governance arrangements
The UK Corporate Governance Code July 2018 (‘the Code’), available at www.frc.org.uk, applied to the Group during the period
from 1 October 2023 to 1 October 2024 when it had a premium listing on the London Stock Exchange and the Board confirms
that during that period the Group complied with all relevant provisions of the Code. Following the acquisition of the entire issued
and to be issued share capital of the Group by Nationwide on 1 October 2024, the Group ceased to have a premium listing, and
the Code therefore no longer applies. However, the Board remains committed to high standards of corporate governance and
has elected to continue to adopt relevant parts of the Code as a matter of best practice. Therefore the Group does not apply the
UK Corporate Governance Code but applies its own governance arrangements.
The Board acknowledges the revised UK Corporate Governance Code published in January 2024, which has an effective date
of 1 January 2025 (with a one-year delay to the effective date for Provision 29 on internal controls), and will continue to be
guided by the new Code as a source of best practice from 1 April 2025 (1 April 2026 for Provision 29).
Set out below are the overarching principles which the Group believes are appropriate to ensure effective decision-making to
promote the Group’s long-term success, and how these principles have been applied during the financial period ended 31
March 2025.
81
Governance report (continued)
Voluntary compliance with the UK Corporate Governance Code 2018 (continued)
Principle One – Board Leadership and Company Purpose - “A successful company is led by an effective and
entrepreneurial board whose role is to establish the company’s purpose, values and strategy, aligned to its culture,
acting with integrity and in line with a framework of prudent and effective controls which enable risks to be assessed
and managed. Decisions should be made to promote the company’s long-term sustainable success for the benefit of
its shareholders and ensuring the interests of all stakeholders and the contribution to wider society are fully
understood and considered.”
The role of the Board
The Board is responsible for the overall leadership of the Group including through culture, values and ethics aligned to our
purpose ‘Banking - but fairer, more rewarding and for the good of society’; for approving the Group’s long-term strategy, having
regard to the interests of all stakeholders; and for ensuring the strategy is implemented within a robust governance, risk appetite
and control framework. You can read more about the Group’s purpose, business and strategy and how it delivers long-term,
sustainable value for its shareholder, Nationwide, on pages 3 to 7. In setting and overseeing implementation of the strategy, the
Board recognises the importance of listening to and understanding the views of all of its stakeholders and considers the impacts
that its decisions might have on them. Examples of how Directors engaged directly or indirectly with its stakeholders throughout
the period, along with the Directors’ statement of compliance with their duties under section 172 of the Companies Act 2006,
are provided on pages 83 to 87. The Board’s role also includes ensuring that the resources are in place for the Group to meet
its objectives, including that the Board itself has the appropriate skills, knowledge and experience to be effective, and for
monitoring performance against those objectives.
The Board is the ultimate decision-making body for the most material matters but is supported in its work by its committees,
principally the Audit, Governance and Nomination, Remuneration and Risk committees, which make decisions and
recommendations on matters delegated by the Board. Board Committee chairs report to each Board meeting following a
Committee meeting. Additionally, the Board has delegated responsibility for the day-to-day running of the Group to the Chief
Executive Officer who is supported by the Executive Committee, the Executive Risk Committee and other specialist
committees.
You can read more about the Board’s role and responsibilities, including the matters reserved for its own decision making, in
the Board Charter available on the Group’s website (www.virginmoneyukplc.com) along with the Charters for each principal
Board Committee.
How the Board operates
The Board held fifteen scheduled meetings during the reporting period and attendance is set out on page 80. The Board also
held ad-hoc meetings when matters of a time-critical nature needed escalating for information or decision making, for example
at key points during 2024 in relation to the acquisition.
During the period, the Board Chair continued the practice of holding several meetings of Non-Executive Directors without
Executive Directors present usually immediately prior to the start of each Board meeting.
The Group General Counsel and Chief Risk Officer attend the majority of each Board meeting and other members of executive
or senior management attend for agenda items relating to their respective business and subject matter areas. The Group
Company Secretary attends all Board meetings for the purposes of producing the minutes of the meeting, recording Board
decisions and actions and to give advice on governance matters.
The Board Chair leads the agenda setting process in conjunction with the Group Company Secretary who maintains a rolling
calendar of items to be covered by the Board during the period. Board meetings are structured to ensure that the Board’s time
is prioritised on the most material strategic and business items including items reserved for the Board’s own decision making.
During the reporting period, time was factored into Board meetings to focus on developing the Group’s strategy leading to the
approval of the Strategic and Financial Plan. Where necessary external advisors and experts are invited to join Board meetings
for deep dives on specific topics which provides Directors with the opportunity to gain deeper insights and build their knowledge.
Time is also allowed for training sessions.
Board operations, including the agenda setting process, the focus of the Board’s time, quality of reporting and escalation of
issues is formally reviewed as part of the Board Performance Review with improvement actions taken as necessary.
The section below sets out the key matters the Board considered in the reporting period.
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Governance report (continued)
Key matters considered by the Board during the reporting period
Strategy development and performance
•
Considering and approving, including recommending to the Group’s shareholders where appropriate, matters in
relation to the acquisition;
•
Receiving briefings on operational readiness following completion of the acquisition including stakeholder
communication plans;
•
Approving the Strategic and Financial Plan including a refreshed plan for the period FY25 – FY30 aligned to a common
set of four Nationwide Group strategic drivers;
•
Being engaged on the development and launch of Nationwide and Virgin Money’s joint Blueprint for a modern mutual
centred around a common purpose, four strategic drivers and customer first behaviours;
•
Overseeing the execution of the Strategic and Financial Plan including receiving reports from the Chief Executive
Officer and other executives on financial, trading, operational and risk appetite performance, including the new Chief
Executive Officer’s 100-day priorities;
•
Monitoring progress on execution of the ESG strategy and progress towards the Group’s net zero goals;
•
Receiving updates on the delivery of major strategic change and transformation projects including those initiated to
improve customer service and experience, improve technology, to upgrade financial crime prevention and cyber
defence capabilities and to strengthen risk management;
•
Approving material third-party arrangements.
People, culture and remuneration
•
Supporting the People Strategy and Diversity, Equity and Inclusion Strategy;
•
Reviewing the Board Diversity and Inclusion Policy and monitoring progress towards the targets set for Board
composition in addition to keeping updated on the Group’s progress on the Diversity, Equity and Inclusion agenda
including the embedding of the BRAVER initiative;
•
Regularly reviewing the Board Succession Plan; on the recommendation of the Governance and Nomination
Committee approving Board appointments and resignations;
•
Keeping updated on the strength and depth of succession plans for Executive Committee members and senior
management including the development of a talent pipeline;
•
Agreeing and keeping under review the effectiveness of the Workforce Engagement Programme and considering key
themes of feedback;
•
Monitoring colleague engagement and culture, for example through reports on the results of the annual MyVoice
survey and periodic Pulse surveys and through review of the quarterly Culture Dashboard with a particular focus on
how colleagues were feeling about the acquisition.
Customers
•
Closely monitoring progress on improving customer service and experience including receiving detailed briefings on
the action being taken to address the root cause of and improve the management of customer complaints;
•
Approving the Annual Report on Consumer Outcomes, receiving progress updates on the embedding of the second
phase of Consumer Duty requirements which came into effect in July 2024 and providing challenge and input to
improve customer outcomes including changes to back book pricing across savings and mortgage portfolios;
•
Receiving a briefing and periodic updates on the Vulnerable Customer Strategy including the practical steps being
taken to improve identification of customer needs and to customise the support vulnerable customers receive;
•
Holding spotlight sessions focusing on the Residential mortgages, Business and commercial lending, and Consumer
lending portfolios covering portfolio performance and outlook, customer proposition innovation and development and
progress being made on improving customer experience
•
From a sustainability perspective, keeping updated on the delivery of a set of customer propositions to support the
transition to a low carbon economy;
•
Approving matters in relation to taking full ownership of VMI which completed in April 2024 and receiving periodic
reports on how VMI’s digital platform and range of products is making investment management more accessible to
customers.
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Governance report (continued)
Key matters considered by the Board during the reporting period (continued)
Finance
•
Approving the annual Capital Plan and Funding Plan and related principles;
•
Reviewing, challenging and subsequently approving the ICAAP and the ILAAP;
•
Recommending the final dividend in respect of FY23 to shareholders for approval at the 2024 AGM and approving an
interim dividend in respect of the financial period ending 30 September 2024;
•
In view of the acquisition, suspending and then approving the cancellation of the share buyback programme launched
in November 2023;
•
Following review and input by the Board Committees as appropriate, approving the Annual Report and Accounts,
interim results, trading updates and Pillar 3 disclosures published during the reporting period; approving a change in
accounting reference date to align with Nationwide;
•
Receiving updates from the Chief Financial Officer including financial highlights, asset quality and capital, funding and
liquidity metrics;
•
Reviewing macroeconomic, geo-political and market conditions and the impacts of these on performance and strategy
and the response.
Risk, regulatory and governance
•
Following review and challenge by the Risk Committee, approving the Risk Management Framework and RAS and
updates;
•
Reviewing and approving the Operational Resilience Self-Assessment and kept updated on progress to achieve
compliance with regulatory requirements coming into effect in March 2025;
•
Discussing regulatory matters, where appropriate with representatives from the PRA and FCA, including interim and
annual PRA and FCA assessments, the Group’s response and seeking assurance on delivery of action plans to
address regulatory feedback;
•
Agreeing the Board statement on tax transparency and the statement on modern slavery and human trafficking having
received updates on how the Group is complying with relevant laws, our business practices and framework of policies,
processes and technical standards;
•
Monitoring the Group’s risk profile via reports from the Chief Risk Officer supported by the detailed work of the Risk
Committee;
•
Keeping the Group’s corporate governance arrangements under review including the changes necessary following the
completion of the acquisition such as approving the Governance Framework.
Stakeholder relationships and engagement and s.172(2) statement
In March 2025, Nationwide and Virgin Money’s joint Blueprint for a modern mutual was launched centred around a common
purpose – ‘Banking – but fairer, more rewarding, and for the good of society’ – four strategic drivers and customer first
behaviours The Blueprint sets our strategic direction and ensures our customers’ interests are at the heart of how we do things.
Building and maintaining strong relationships with our stakeholders is central to the Blueprint and is embedded in the Board’s
responsibilities and decision making. The Board is mindful of its duty to act in good faith and to promote the success of the
Group for the benefit of its shareholder and with regard to the interests of all of its stakeholders including customers, colleagues,
investors, the society we operate in and serve, government and regulators and partners and suppliers.
The Board is kept updated on all material issues affecting stakeholders and stakeholder interests and views through direct
engagement and through the reports and updates it receives from management and external advisers.
We have outlined below how the Group and its Directors engaged with stakeholders during the period, and in doing so, how
Directors discharged their duties under s.172(1)(a) to (f) of the Companies Act 2006 to promote the success of the company for
the benefit of its shareholders as a whole. Balancing the needs and expectations of different stakeholders is always at the
forefront of Directors’ minds and the Board acknowledges that some decisions may result in different outcomes for each
stakeholder group. More information on the key areas of focus for the Board during the reporting period is set out in the ‘Key
matters considered by the Board during the reporting period’ section beginning on page 82, in the sections of this Governance
report describing the key areas of activity of each principal Board Committee, in the Risk report and Directors’ report.
During the reporting period the Directors continued to exercise all their duties while having regard to s.172 factors and other
factors as they considered proposals from management and governed the Group on behalf of its shareholders through the
Board.
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Governance report (continued)
Stakeholder relationships and engagement and s.172(2) statement (continued)
Customers
We are committed to supporting and ensuring good outcomes for customers by understanding their needs now and in the future
and the Group remains focused on improving customer service and addressing the root causes of customer complaints.
During the reporting period the Board engaged with customers in a variety of ways including through the reports received at
Board meetings and through spotlight sessions focusing on Retail and Business customers. The Board held several sessions in
preparation for approving the Annual Report on Consumer Outcomes including reviewing and challenging the actions taken to
improve customer outcomes and further improvements to be made. As part of this a full review of off-sale products was
completed and some changes were made to back book pricing across our Savings and Mortgage portfolios.
The MI reported to the Board provides insight into customer outcomes, service performance, customer satisfaction and
complaints which the Board scrutinises to ensure overall customer experience is improving. The Board also focuses on how the
Group is supporting specific customer groups and as an example, during the reporting period received periodic updates on our
Vulnerable Customer Strategy including the practical steps being taken to customise the support vulnerable customers receive
and the training being provided to colleagues to enable this.
More generally, the Board benefits from customer insights from Directors’ broader external experience and board appointments.
Colleagues
Colleagues who feel engaged, supported and enthusiastic about the work they do are critical to delivering the best experience
for our customers.
Our Workforce Engagement Programme continued throughout the past 18 months providing regular opportunities for Directors
and colleagues to connect, whether virtually or in-person, on topical issues. The Programme involves colleagues from all levels
and locations ensuring that the views of the full-cross section of the workforce are heard. There is time on the agenda for each
Board meeting for Directors to report back on key messages and a report is provided on the themes of colleague feedback
which are fully considered in the Board’s decision-making. During the reporting period, key topics discussed included Virgin
Money’s culture, the impact of the ‘A Life More Virgin’ colleague proposition on productivity, customer service and wellbeing, the
embedding of the BRAVER diversity, equity and inclusion framework and how colleagues were feeling about the acquisition.
Additionally, the Chair of the Remuneration Committee held remuneration focused colleague engagement sessions in
September reporting key feedback themes to that Committee. The Board keeps the effectiveness of the Programme under
review and looks for opportunities to broaden its reach, for example most recently by looking for ways to more formally involve
the Inclusion Networks.
Our Disability Confident Leaders status signifies our commitment to fostering an inclusive workplace for colleagues with
disabilities and long-term health conditions. As a Disability Confident Leader, we continuously evaluate and improve our policies
and practises to ensure accessibility and support for all colleagues and customers. We continue to fulfil our regulatory duties
and have introduced specialist workplace adjustments for colleagues with disabilities, long term health conditions and
neurodivergence, this includes physical adjustments and/or education and training. During the reporting period we have
introduced people leader guidance to support neurodivergent colleagues and increase knowledge and understanding.
The Chief Executive Officer, supported by members of the Executive Committee, hosts regular ‘Straight Up’ sessions for all
colleagues to join in-person or virtually to discuss and share feedback on a mix of topics that are front of mind for colleagues
which has included discussing the natural uncertainty from colleagues following the acquisition.
Colleague sentiment is also measured through the annual MyVoice survey and periodic pulse checks with results reported to
the Executive Committee and Board in addition to colleagues via a bespoke business unit report. The Executive Committee
discusses the results and themes of feedback and considers the action that needs to be taken. The Culture Dashboard reported
quarterly to the Board provides additional cultural insights.
Outcomes following engagement with customers
> Continued progress in digitising customer journeys and propositions including signing a strategic partnership with
Experian which will improve the Group’s digital customer experience for unsecured lending.
> Embedded the second phase of Consumer Duty requirements including improved customer communications.
> Launched a training programme for customer-facing colleagues to equip them with the skills to support and talk to
customers about their money worries and mental health.
> Expanding the AI-powered virtual assistant, Redi, to be available 24/7 for personal banking customers who manage their
current accounts via the app.
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Governance report (continued)
Stakeholder relationships and engagement and s.172(2) statement (continued)
In March 2024 the Group’s new Glasgow head office fully opened creating a modern, vibrant and state of the art space for
colleagues. Designed with the input of colleagues, including our colleague Inclusion Networks, the space has wellness,
inclusivity and sustainability at its heart and provides flexible accommodation for collaboration, team events or individual
focused working.
Investors
Throughout the reporting period the Board has continued to regularly engage with shareholders to understand their
expectations and gain feedback on the Group’s strategy. Following the completion of the acquisition on 1 October 2024, the
Group now has a sole shareholder being Nationwide.
The proposed acquisition was a key area of Board focus particularly throughout the first half of 2024 leading to the boards of
directors of Nationwide and Virgin Money announcing on 21 March 2024 that they had agreed the terms of the acquisition and
the Group’s Directors recommending to the Group’s shareholders that they vote in favour of the scheme of arrangement
(Scheme) to implement the acquisition. The terms and conditions of the Scheme were set out in the Scheme Document
approved by the Board and sent or made available to the Group’s shareholders on 22 April 2024. At a Court Meeting and a
General Meeting held on 22 May 2024 the requisite majority of shareholders voted to approve the Scheme and pass related
resolutions. For further details please see the Results of Court Meeting and General Meeting announcement issued by the
Group on 22 May 2024.
Throughout the reporting period, the Group has maintained a comprehensive engagement programme continuing to hold
meetings with investors and keeping them updated including through financial reporting and presentations which following the
completion of the acquisition has focused on engagement debt investors.
The Board considers engagement with Nationwide as being critical to its understanding of the combined Group strategy and the
Group’s role within that. To facilitate this engagement, David Bennett the Group’s Board Chair joined the Nationwide Board as a
Non-Executive Director with effect from 13 November 2024 and his position on the Nationwide Board also ensures that the
views of the Group are represented at Nationwide Group level. David Bennett and Chris Rhodes participated in a Nationwide
Strategy Day in October 2024 reporting back to the Group’s Board and in developing the Group’s latest Strategic and Financial
Plan the Board has full regard to the interests of Nationwide.
Outcomes following engagement with colleagues
> Colleague engagement remained positive based on the 2024 MyVoice survey with 77% engagement overall, improving
to 84% in the first Pulse survey of 2025.
> Making positive progress in many aspects of our Diversity, Equity and Inclusion agenda which colleagues helped shape,
for example by welcoming 23 interns to the Group as part of the 10,000 Black and Able Internship Programme.
> Continuing to evolve our colleague communication approach to ensure there are regular opportunities to engage on
topical issues including progress in delivering against our strategy and our transition to being part of the broader
Nationwide Group.
> Expanding the Careers site to include all available opportunities at the Group and the Nationwide Group making
information on vacancies across the combined Group more accessible.
> Enable, our network dedicated to supporting colleagues with disabilities and/or caring responsibilities, partnered with
Purple Space to accelerate progress on disability inclusion. This partnership, focusing on building disability confidence by
empowering colleagues with disabilities and allies to drive disability inclusion through powerful networks and bold
leadership, contributed to an almost 20% growth in membership within the network.
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Governance report (continued)
Stakeholder relationships and engagement and s.172(2) statement (continued)
The Group remains a separate legal entity within the combined Group with a separate Board and banking licence held by
Clydesdale Bank PLC. Recognising the legal entity and regulatory structure to be in place post the completion of the acquisition
the boards of Nationwide and Virgin Money approved a Governance Framework containing details of the Group’s legal entity
structure and its boards, board committees and executive management forums and explains how these bodies operate and
interact in accordance with the legal and regulatory requirements applicable to them collectively and individually, while
promoting the success of the Group as a whole and enabling the Society to direct and drive the overall strategy and direction of
the Group.
Society
The Group seeks to have a positive impact on our customers, communities and wider society through its ‘Beacon for mutual
good’ strategic driver.
We have set an ESG strategy with goals aligned to our strategic drivers which you can read more about on the Group’s website
and in our ESG Hub at www.virginmoneyukplc.com. The Board is kept updated on progress in executing our ESG strategy
including the delivery of a broader set of customer propositions to support the transition to a low carbon economy and in
achieving our net zero goals.
The Group partners with charities to help tackle societal issues which has included colleagues choosing mental health charities
Mind and Scottish Action for Mental Health (SAMH) as new corporate charity partners and teaming up with the Good Things
Foundation to help people facing digital exclusion by introducing the National Databank programme. These partnerships open
up opportunities for the Group’s colleagues too, for example by creating training opportunities to upskill them to better
understand how financial difficulty can impact mental health and to help them better identify and support individuals impacted by
digital exclusion and to signpost them to a nearby National Device Bank.
The Virgin Money Foundation continues to support organisations and people with the vision to change their communities for the
better and targets its funding at communities located in the top 20% of the Index of Multiple Deprivation or Scottish Index of
Deprivation and focused upon the North-East of England and the City of Glasgow. We have learnt from organisations in these
communities about the issues that if addressed would result in positive change for the local community including digital
exclusion.
Government and regulators
Directors and members of the management team maintain a regular dialogue with principal regulators including the supervisory
teams at the PRA and FCA. During the reporting period representatives from each of these regulators joined Board meetings to
speak about the outcome of regulatory reviews, regulatory expectations of the Group as a systemically important Tier 1 bank
and regulatory priorities for the coming period. The Board is kept updated between meetings on key discussion topics and
points of feedback from meetings that members of the management team have with the regulators to ensure there is a regular
flow of information.
Outcomes following engagement with investors
> Considering and approving, including recommending to Virgin Money shareholders where appropriate, matters in relation
to the acquisition;
> Recommending the final dividend in respect of FY23 to shareholders for approval at the 2024 AGM and approving an
interim dividend in respect of the financial period ending 30 September 2024;
> Successfully issued a £350m AT1 instrument, €750m MREL senior note and £500m of RMBS publicly to investors, while
at the same time repaying £3.25bn of TFSME drawings.
Outcomes following engagement with society
> From the start of our partnership with Mind and SAMH to 31 March 2025, we have raised over £429,000.
> Hosting a workplace wellbeing event in collaboration with SAMH focusing on helping colleagues to think about supporting
customers in the relationship between money and mental health, as well as their own wellbeing.
> Continuing to focus on progress to net zero goals including across the Business and commercial lending portfolio and
operational emissions with continued collaboration through the supply chain.
>Through the partnership with the Good Things Foundation all our branches are now Databanks offering free data to
customers as we continue to focus on fighting the Poverty Premium.
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Governance report (continued)
Stakeholder relationships and engagement and s.172(2) statement (continued)
The Board also maintains an overview of the impact of the broader geo-political environment and its impact including in relation
to Group’s own strategy and outlook. Board briefings during the period included the 2024 UK general election.
Partners and suppliers
Our suppliers help us deliver our strategy and provide quality service for our customers. Usually Directors do not interact
directly with the Group’s partners and suppliers however they receive updates from management which allows them to oversee
supplier relationships and to keep up to date on developments including how our partners are helping to improve customer
service. For example, the Board approved the strategic partnership with Experian to enhance the Group’s digital customer
experience by leveraging its suite of cloud-based technology. Through this partnership the Group will be able to deliver more
personalised financial products for customers, streamline processes and provide engaged security and fraud protection.
Through reports from the Chief Operating Officer, the Board and the Risk Committee were updated on critical third-party
relationships including those involved in supporting the IT infrastructure and customer servicing and challenged on the steps
being taken to mitigate third party risk.
Annually the Board reviews and approves the Group’s Modern Slavery Statement and in doing so receives a report from
management on the Group’s commitments in combatting modern slavery. This includes our Supplier Code of Conduct which
sets out the standards, principles and behaviours we expect from our suppliers. Our supplier sourcing and due diligence
processes are regularly reviewed to ensure they are fit for purpose and reflective of current risks and we include a modern
slavery clause in our contracts with suppliers.
Outcomes following engagement with government and regulators
> Action plans to respond to regulatory reviews ensuring the Group makes progress on priority areas in line with regulatory
expectations.
> Submitting to the FCA the first Annual Report on Consumer Duty Outcomes and achieving compliance with Consumer
Duty regulatory requirements which came into effect in July 2024.
Outcomes following engagement with suppliers
> Approved the Modern Slavery Statement available on our website at www.virginmoneyukplc.com.
> Partnering with suppliers to open our new head office in Glasgow designed to be the city’s most environmentally friendly
building.
>Through reports from management, monitoring third party risk.
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Governance report (continued)
Principle 2 – Division of Responsibilities – “An effective board requires a clear division of responsibilities with the
Chair leading the board and being responsible for its overall effectiveness. The board should include an appropriate
combination of executive and independent non-executive directors having a clear understanding of their
accountability and responsibilities. The non-executive directors should have sufficient time to meet their board
commitments and should provide constructive challenge, strategic guidance and hold management to account. The
board’s policies and procedures should ensure that it has the information, time and resources to support effective
decision-making.”
Board Chair responsibilities
There is a clear division of responsibilities between the Board Chair as leader of the Board and the Chief Executive Officer who
is responsible for the day-to-day management of the Group. The composition of the Board, which includes an appropriate
balance of Executive and Non-Executive Directors as set out in the table on page 80, ensures that no one individual or small
group of individuals dominates the Board’s decision making. The responsibilities, competencies, behaviours and minimum time
commitment expected of Directors and for each specific Board role are set out in the Charter of Key Board Roles and
Expectations reviewed periodically and agreed by the Board.
David Bennett leads the Group’s Board and is responsible for its overall effectiveness and for promoting high standards of
corporate governance. The Board Chair promotes a culture of openness and inclusion and encourages open constructive
debate between all Directors which challenges executives where appropriate. He also leads Board succession planning and
ensures new Non-Executive Directors receive a formal, tailored induction in addition to ongoing professional development for
serving Directors. The Board Chair seeks to ensure effective communication with shareholders and that the entire Board has an
understanding of their views.
Chief Executive Officer responsibilities
Responsibility for the day-to-day management of the Group is delegated by the Board to Chris Rhodes, Chief Executive Officer.
Supported by the Executive Committee, he makes decisions on matters impacting the operations and performance of the Group
and leads the delivery of the Strategic and Financial Plan approved by the Board. Following the Board’s lead, he actively
promotes the development of the Group’s culture demonstrating the Group’s customer first behaviours led by our purpose.
Executive Committee
The Executive Committee is appointed and chaired by the Chief Executive Officer and is responsible for delivering the initiatives
that underpin the Group’s Strategic and Financial Plan within the Risk Appetite approved by the Board. Membership comprises
the Chief Executive Officer, the Chief Financial Officer and the Chief Risk Officer and the leaders of the business functions. The
biographies of all Executive Committee members are on the Group’s website at www.virginmoneyukplc.com.
The Executive Committee Charter sets out the Committee’s scope and responsibilities. The Board reviews and approves the
Delegation of Authority Framework which sets out the authorities delegated by the Board to the Chief Executive Officer and
from the Chief Executive Officer to members of the Executive Committee.
Independence, election and re-election of Directors
A majority of the Board (71.4% excluding the Board Chair) comprises independent Non-Executive Directors in line with the
requirements of the Code. The Governance and Nomination Committee reviews independence annually and as part of this
process the Committee also reviews the length of tenure of each Director in addition to considering skills and experience, time
commitment and conflicts of interest leading to the Committee recommending Directors for election and re-election at the AGM.
As a result of the 2025 review, the Committee and the Board judged all serving Non-Executive Directors to be independent in
line with the Code. David Bennett was considered independent on appointment as Board Chair in May 2020. The Board is of the
view that all Directors bring considerable knowledge, wide ranging skills and experience to the Board, each making a valued
contribution and being effective and committed to their roles. On this basis the Board intends to recommend all Directors for
election or re-election, as appropriate, at the 2025 AGM.
Time commitment
All Directors are expected to devote sufficient time to perform their duties effectively. When making new appointments, the
Board considers other demands on a Director’s time and prior to appointment a prospective new Director is informed of the
minimum time commitment required and must disclose all of their existing significant commitments including significant director
appointments, as defined in the Board Charter, and other appointments along with the time involved. The time commitment
required varies according to a Non-Executive Director’s role, for example additional time will be necessary for chairing a Board
Committee, and as well as the time required to prepare for and attend Board and Board Committee meetings for meetings with
the Group’s stakeholders, for participation in the Workforce Engagement Programme and for professional development and
training, for example.
For serving Directors, proposed external appointments must be agreed with the Board Chair and disclosed to the Board before
taking on the role and an assessment is undertaken of a range of factors including the impact of the proposed external
appointment on capacity and time commitments, independence and conflicts of interest.
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Governance report (continued)
Division of Responsibilities (continued)
Time commitments are reviewed annually and the Governance and Nomination Committee periodically reviews the number of
external appointments held by each Director. Key external appointments are set out in each Director’s biography on the Group’s
website at www.virginmoneyukplc.com . No serving Director at the date of this Governance report took on a new significant
director appointment, as defined in the Board Charter, during the reporting period and no Executive Director has either taken up
more than one non-executive director role at a FTSE 100 company or other significant appointment. Following this period’s
review, the Board is satisfied that all external appointments held by Directors are appropriate and that each Director has
sufficient time to undertake their Group roles effectively taking into account their other commitments.
Managing conflicts of interest
Each Director is required to notify the Board of any actual or potential situational or transactional conflicts of interest and must
keep the Board updated on any changes to the factors and circumstances surrounding such conflicts. Actual or potential
conflicts of interest are assessed when a new Director joins the Board and are periodically reviewed, with time at the outset of
each Board meeting for Directors to declare any conflicts in relation to the matters on the Board’s agenda. Situational conflicts
can be authorised by the Board in accordance with the Companies Act 2006 and the Company Articles of Association. The
Board considers each request for authorisation on a case-by-case basis and has the power to impose conditions or limitations
on any authorisation it grants. Details of all Directors’ conflicts of interest are recorded in a register maintained by the Group
Company Secretary and reviewed by the Board annually.
Training, development and induction
The Board Chair is responsible for leading the development and training of the Board considering a range of factors including
the output of the annual Board Performance Review and the evaluation of each Director’s own performance. Directors
participate in an ongoing programme of training and development, organised on behalf of the Board Chair by the Group
Company Secretary. Training is delivered through briefings, deep dives or presentations delivered by the Group’s own
management team and sometimes by external advisers which during the financial period included briefings on Directors’
responsibilities in connection with the acquisition. Additionally, Directors undertake the same online ‘Professional Passport’
training as colleagues covering a range of customer, culture and risk related topics. Board Committee specific training is agreed
with Committee Chairs as needed.
Outside the formal training delivered for the Board collectively, the Board Chair encourages Directors to focus on their
professional development individually and to undertake the training they consider necessary to assist them in fulfilling their
duties effectively. The Board Chair discusses individual performance and development needs with Directors throughout the
financial period in one to one meetings.
The Board Chair ensures that new Directors receive a formal induction tailored to their individual requirements, skills and
experience which the Group Company Secretary coordinates. Additionally, a Director taking on a senior management function
role as prescribed under the Senior Managers and Certification Regime undertakes a full and formally documented handover of
responsibilities with the outgoing role holder and induction is also tailored if any new or serving Director is taking on a specific
Board role such as a Board Committee Chair.
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Governance report (continued)
Principle 3 – Composition, succession and evaluation – “The size of the board should be guided by the scale and
complexity of the company and should have an appropriate combination of skills, experience and knowledge.
Appointments should be subject to a formal, rigorous and transparent procedure ensuring any appointments and
succession plans are based on merit and objective criteria and promote diversity of gender, social and ethnic
backgrounds, cognitive and personal strengths. Board composition should be evaluated annually and include
consideration of diversity and how effectively members work together to achieve objectives.”
Board composition and succession
Lucinda Charles-Jones joined the Board on 22 January 2024 as a Non-Executive Director succeeding Darren Pope as Chair of
the Remuneration Committee on 1 March following completion of a transition and handover period. Darren remained on the
Board until stepping down on 1 October 2024. Petra van Hoeken joined the Board as a Non-Executive Director and Chair of the
Risk Committee on 1 July 2024 replacing Geeta Gopalan who stepped down on 30 June 2024.
Following the acquisition becoming effective on 1 October 2024, David Duffy stepped down as Chief Executive Officer and
Executive Director on that date and the appointment of Chris Rhodes as Chief Executive Officer and Executive Director became
effective. Additionally, Sara Weller, the Group’s Director appointed as a representative of Virgin Enterprises Limited, stepped
down from the Group’s Board also on 1 October 2024 upon the acquisition becoming effective.
Clifford Abrahams stepped down as Chief Financial Officer and Executive Director on 15 December 2024 and was replaced by
Gergely Zaborszky who became Chief Financial Officer and Executive Director on 4 March 2025 upon regulatory approval.
Tracey Graham joined the Group Board as a Non-Executive Director on 23 January 2025.
The Governance and Nomination Committee oversaw the succession planning process for the Chair of the Remuneration
Committee and Chair of the Risk Committee roles recommending the appointments to the Board for approval. Third-party
search firms Teneo People Advisory (Teneo) and Russell Reynolds Associates Limited (Russell Reynolds) were engaged to
assist with the Remuneration Committee and Risk Committee searches respectively. Both Teneo and Russell Reynolds have
previously been engaged on prior Board and executive recruitment and skill review projects. For each appointment, a candidate
specification was prepared based on objective criteria and setting out the knowledge, skills and experience required in addition
to the personal characteristics sought in candidates. Teneo and Russell Reynolds then used the candidate specification to
compile a longlist of potential candidates which was reviewed by a small group of Directors. Both roles were also openly
advertised on the Group’s website. From each longlist, shortlists were agreed following which candidates were interviewed by
the respective search firm and full candidate reports were produced and reviewed by the Governance and Nomination
Committee. Priority candidates for each role were identified and interviewed by panels of Directors also involving the Group
Chief People and Communications Officer. Lucinda Charles-Jones emerged as the preferred candidate for the Remuneration
Committee Chair role and Petra van Hoeken for the Risk Committee Chair role. Both underwent customary pre-appointment
due diligence and were then offered the roles subject to their appointments being approved by the PRA with the consent of the
FCA. This regulatory approval was subsequently granted.
Board and Board committee composition is kept under review to ensure Directors provide the appropriate combination of
knowledge, skills and experience also having regard to the diversity and independence profile of the Board. These regular
reviews identify the current and potential future needs of the Board aligned to the Group’s strategy and future challenges and
opportunities. During the reporting period a review of Board skills was undertaken. This involved developing a matrix reflecting
Directors’ self-assessment of the skills and experience they bring to the Board and considering the collective skills profile
relative to the Group’s current and future needs to identify any gaps. The Governance and Nomination Committee was satisfied
that overall the Board, and its committees, comprise members with skills, experience and competencies aligned to the Group’s
strategic priorities and relevant to the Group’s business as a financial services provider but used the Remuneration Committee
Chair and Risk Committee Chair recruitment processes as opportunities to refresh Board composition recognising the benefit of
introducing new perspectives to Board discussions and decision-making. Board and committee composition and the Board skills
matrix will continue to be reviewed at least annually in addition to being an input to succession planning and Board member
recruitment activity.
91
Governance report (continued)
Board composition and succession (continued)
The table below shows the skills, experience and knowledge of the Non-Executive Directors on the Board as at 31 March 2025
based on Directors’ self-assessment. Only direct or practical career experience is reported – the majority of Non-Executive
Directors have indirect experience across all categories, for example gained from other Board positions.
Direct
Indirect
None
Financial Services Retail
6
-
-
Financial Services SME
6
-
-
Non-Financial Services Retail
2
4
-
Non-Financial Services SME
1
3
2
Financial markets / wholesale banking / treasury
2
2
2
Digital / Innovation
2
4
-
FinTech
1
3
2
Business transformation / major change programmes
6
-
-
Finance / accountancy / auditing
4
2
-
Financial Services Risk Management
1
5
-
Non-Financial Services Risk Management
2
4
-
Compliance / banking regulation / government
5
1
-
Technology infrastructure / operations
1
5
-
Customer Operations
3
3
-
Customer Engagement, Experience and Insights
3
3
-
Partnerships and Collaboration
4
2
-
Brand / marketing / distribution
2
4
-
Legal
2
4
-
Corporate Governance / listed board / IR
4
2
-
People, Culture, Purpose
4
2
-
Financial Services Remuneration
3
3
-
Non-Financial Services Remuneration
3
3
-
ESG – environment, sustainability and climate change
2
4
-
ESG – social, inclusion and diversity
3
3
-
Executive and senior management succession
The Governance and Nomination Committee and Board regularly reviews the Executive Committee and senior management
succession plans and the talent pipeline to ensure that the Group has the breadth and depth of talent needed for the future.
Throughout the reporting period the Group Chief People and Communications Officer led updates on the succession plan for
the Executive Committee and one level down including the availability of caretaker cover for unforeseen vacancies, ready-now
successors and those who are expected to be capable of stepping into roles over the medium-term. The Board had regard to
diversity across succession cover and in doing so also received updates on progress with the Diversity, Equity and Inclusion
strategy. The Workforce Engagement Programme (described in the Colleagues section on page 84) provides an opportunity for
Directors to get to know colleagues in the talent and succession population. The Governance and Nomination Committee and
Board will keep the Executive Committee and senior management succession plan under review to ensure that the Group has
the skills and experience in place to support the execution of the strategy and that any gaps are addressed particularly in the
context of supporting the integration into the wider Nationwide Group.
Diversity and inclusion
The tables below illustrate the Board composition as at 31 March 2025. When measured against the targets in the Board
Diversity and Inclusion Policy (Policy) which applied for the reporting period, we have not met our target to have at least one
Director from an ethnic minority background on the Board following the departure of Geeta Gopalan in June 2024. Women’s
representation on the Board was 50.00% as at 31 March 2025, which exceeds our 40% target, however none of the senior
Board positions (Board Chair, Senior Independent Director, Chief Executive Officer or Chief Financial Officer) were held by a
woman.
92
Governance report (continued)
Diversity and inclusion (continued)
As at the date of this report, all Directors, other than David Bennett, have a tenure not exceeding nine years. Each Director’s
date of joining Virgin Money is included in their biography on Virgin Money’s website at www.virginmoneyukplc.com.
Chair
Independent
non-executive
directors
Executive
directors
Total
Composition by role
1
5
2
8
0 to 2 years
3 to 5 years
6 to 8 years
9 years and
over
Total
Composition by tenure
5
1
1
1
8
Male
Female
Total
Composition by gender
4
4
8
55 and below
56 and over
Total
Composition by age
2
6
8
The Governance and Nomination Committee monitors the Board’s diversity profile including the forecast profile taking into
account future Board changes. The Policy, available on the Group’s website, is reviewed annually and diversity targets set
regarding the representation of women and ethnic minorities on the Board. The diversity information for the Board, principal
Board Committees and executive management, as well as an explanation of the data collection approach, is set out below.
The Board is committed to ensuring that its membership is representative of the diverse societies and communities it operates
in. The Policy’s objectives ensure that an inclusive process is followed when recruiting Board members which includes that in
reviewing Board composition and in identifying suitable candidates for appointment, the benefits of diversity amongst Board
members including age, gender, ethnicity, disability, educational, professional and socio-economic background are carefully
considered alongside other distinctions between Directors such as cognitive and personal strengths. Additionally, all Board
appointments are made based on merit against objective criteria, in the context of the skills, experience, independence and
knowledge which the Board requires to be effective.
The Board aspires to have:
Performance as at 31 March 2025
A membership comprising at least 40% women Directors
50.00% of Directors are women
At least one of the senior Board positions (Chair, Senior
Independent
None of the senior Board positions are held by a woman
At least one member of the Board who is from a minority ethnic
background
No member of the Board is from a minority
ethnic background
Additionally, the Board aspires that the membership of each of its Committees comprises at least 40% women with one
committee member in each case being from a minority ethnic background.
Based on current Board composition, the Board recognises that its membership has fallen short of the target to have one Board
member who is from a minority ethnic background and that it has still to meet its target to have at least one of the senior Board
positions held by a woman by the end of 2026. The Board also recognises that due to its relatively small size the appointment or
departure of a single Director can have a significant impact on the achievement of its targets and therefore it is acknowledged
that in periods of Board change there may be times when these targets are not met. However, through the succession planning
process, the Board remains focused on meeting these targets in the near term while continuing to ensure that Board
appointments are based on merit against objective criteria.
The Board firmly believes that creating and sustaining a diverse workforce at all levels within the Group and building a fully
inclusive culture is critical to the Group’s long-term sustainable success, to foster decision making that represents the broadest
set of views and perspective and to mitigate the risk of ‘group think’. The Board monitors progress through regular reports from
the Group Chief People and Communications Officer and through other means as described in the stakeholder engagement
section of this report.
93
Governance report (continued)
Diversity and inclusion (continued)
Reporting table on gender identity or sex as at 31 March 2025(1)(2)
Men
Women
Not specified / prefer
not to say
Number of Board members
4
4
-
Percentage of Board members
50.00%
50.00%
-
Number of senior positions on the Board
(CEO, CFO, SID and Chair)
4
-
-
Governance and Nomination Committee
Principal board
committees
2
4
-
Percentage of Governance and
Nomination Committee members
33.33%
66.67%
-
Audit Committee
1
3
-
Percentage of Audit Committee members
25.00%
75.00%
-
Risk Committee
1
3
-
Percentage of Risk Committee members
25.00%
75.00%
-
Remuneration Committee
2
3
-
Percentage of Remuneration Committee
members
40.00%
60.00%
-
Number in executive management
8
3
-
Percentage of executive management
73.00%
27.00%
-
(1) Board members were asked to report on their gender identity and ethnicity in their responses to information sought to support the annual review by the
Governance and Nomination Committee of the structure, size and composition of the Board.
(2) Executive management members who are not also Board members were requested to disclose their gender identity and ethnicity data individually. The data in
respect of the one executive management member who is also a Board member has been included in both the Board data and in the executive management data
in the tables above.
Reporting table on ethnic background as at 31 March 2025(1)(2)
White British
or other White
(including
minority-white
groups)
Mixed/
Multiple
Ethnic
Groups
Asian/Asia
n British
Black/African/
Caribbean/
Black British
Other ethnic
group,
including Arab
Not specified/
prefer not to
say
Number of Board
members
8
-
-
-
-
Percentage of Board
members
100.00%
-
-
-
-
-
Number of senior
positions on the Board
(CEO, CFO, SID and
Chair)
4
-
-
-
-
-
Governance and
Nomination Committee
Principal
board
committees
6
-
-
-
-
-
Audit Committee
4
-
-
-
-
-
Risk Committee
4
-
-
-
-
-
Remuneration
Committee
5
-
-
-
-
-
Number in executive
management
10
-
-
1
Percentage of executive
management
91.00%
-
-
9.00%
-
-
(1) Board members were asked to report on their gender identity and ethnicity in their responses to information sought to support the annual review by the
Governance and Nomination Committee of the structure, size and composition of the Board.
(2) Executive management members who are not also Board members were requested to disclose their gender identity and ethnicity data individually. The data in
respect of the one executive management member who is also a Board member has been included in both the Board data and in the executive management data
in the tables above.
94
Governance report (continued)
Board performance
A review of the performance of the Board, the principal Board Committees, the Board Chair and of individual Directors takes
place annually and is an opportunity to improve the efficiency of the Board by maximising strengths and highlighting areas for
development as part of the Board’s commitment to continuously improve its performance.
The Board conducted two internally facilitated performance reviews during the reporting period to assess progress made since
the last externally facilitated reviewed conducted by Korn Ferry (UK) Limited (Korn Ferry) in 2022 / 2023 the output and
recommendations from which were reported on within the 2023 Annual Report and Accounts. The first review was conducted
during the period October 2023 – January 2024 and the second during September 2024 – October 2024, the latter providing a
temperature check to inform future Board effectiveness and optimisation looking ahead to the completion of the acquisition and
the adoption of the new Governance Framework between the Board and Nationwide Board.
Both internal reviews began with a questionnaire, agreed by the Governance and Nomination Committee, which Directors
completed covering many of the same topics assessed in the Korn Ferry review including perspectives on Group’s strategy,
challenges and opportunities; the mandate of the Board; Board composition; Directors’ contribution; Board dynamics and
culture; the support provided to the Board and the performance and operation of the Board’s principal committees. The second
review also asked for feedback on how the acquisition process was managed from the Board’s perspective. The Group
Company Secretary collated and analysed the responses to each questionnaire and prepared a report drawing out the key
performance themes, areas of strong performance and suggested improvement areas also showing where scores had
improved or declined year-on-year. This thematic report was discussed by the Governance and Nomination Committee and
presented to the Board which agreed an action plan to address improvement areas. The Board delegated to the Governance
and Nomination Committee to monitor the progress of the action plan reporting periodically to the Board.
Outputs from the Board performance review specific to each principal Board Committee were reported to the relevant
Committee and an action plan agreed where appropriate.
Overall the findings confirmed that the Board and the Board Committees are effective and no significant concerns or issues
were raised. A summary of the areas of focus, recommendations and action taken following the most recent review is provided
in the table below.
Areas of focus and recommendations
Progress and action taken
Board materials – make improvements to Board papers to
ensure they focus on the matters of most relevance for the
Board.
New Board report templates were introduced; the standing reports to the
Board, including the CEO’s report, were refocused; plans being
prepared to move to an automated Board report writing tool. The new
Risk Committee Chair worked with management to refresh risk reporting
to that committee including reports from the Chief Risk Officer and Chief
Operating Officer.
Board routines – continue to strike the right balance between
physical meetings compared to virtual meetings and
maintain informal engagement opportunities.
The calendar of Board and Board Committee meetings for 2025 was
reviewed and the balance of physical and virtual meetings agreed with
the Board Chair and Directors; Board dinners are also planned
throughout the period for more informal engagement.
Board focus – further strengthen the Board’s focus on
customer matters.
Improved insight into customer services and operations has been
introduced to Board reporting including a new service dashboard,
consumer duty MI and regular reporting on progress with the vulnerable
customer strategy.
Board composition and governance framework – keep the
shape of the Board and the skills required under review as
Virgin Money transitions to Nationwide ownership in addition
to focusing on adapting to a new governance environment.
The Board Succession Plan has been kept up to date and work was
mobilised on a Chair Audit Committee successor in view of Tim Wade’s
forthcoming nine-year tenure in September 2025. The Board approved a
new Governance Framework to apply from 1 October 2024 post
completion of the acquisition and revised its terms of reference to make
it clear which matters require escalation to the Nationwide Board for
review / challenge or decision making.
95
Governance report (continued)
Board Chair performance and tenure
Tim Wade as Senior Independent Director led the annual appraisal of the performance of the Board Chair on behalf of the
Board which included feedback from both Non-Executive Directors and Executive Directors which he shared with David Bennett
in a meeting. The review concluded that David Bennett continued to perform effectively, demonstrated commitment to his role
and remained fit and proper to be Board Chair. To facilitate effective succession planning and the development of a diverse
Board, the review also considered David Bennett’s tenure given that by October 2024 he would have served on the Board for
nine years including as Board Chair since May 2020. Led by Tim Wade, the Board carried out a careful assessment of David
Bennett’s contribution and independence and concluded that his deep experience gained over 40 years in the banking and
financial services industry, as well as his extensive governance expertise and insight, continues to be of significant value to the
Board and is advantageous to the Board's decision making. With the breadth of David's experience in mind, and with the
approval of the PRA and FCA, the Board considered that it is appropriate for David to continue as Board Chair for a further
period of up to two years to October 2026.
Individual director performance
The Board Chair undertook a review of the performance of each Director in role during 2024, informed by peer feedback, and
discussed their performance with each Director in an individual meeting. David Bennett concluded that each Director continues
to contribute effectively and demonstrates commitment to the role.
Governance and Nomination Committee
The Governance and Nomination Committee is responsible, on behalf of the Board, for reviewing the structure, size and
composition of the Board and its committees to ensure an appropriate balance of skills, experience, knowledge, diversity and
independence; for reviewing succession planning for the Board and Executive Committee and recommending the appointment
of Executive Directors, Non-Executive Directors and the Board Chair; for overseeing the annual Board Performance Review;
and for monitoring developments in corporate governance and the impact on the Group’s governance framework.
The Governance and Nomination Committee is comprised of the Non-Executive Directors. Lucinda Charles-Jones, Petra van
Hoeken and Tracey Graham became Committee members on 22 January 2024, 1 July 2024 and 1 February 2025 respectively.
The Chief Executive Officer and Group Chief People and Communications Officer also attend all meetings.
The Governance and Nomination Committee charter, which sets out more details on the Committee’s scope and responsibilities
is available on the Group’s website.
During the reporting period the Committee held five scheduled meetings and four additional meetings focusing on Board and
Executive Committee succession matters.
During the reporting period, the key activities of the Committee were:
> Reviewing the structure, size and composition of the Board and principal Board Committees including the skills and
experience of Directors, time commitment, conflicts of interest and the independence of the Non-Executive Directors
leading to the Committee recommending to the Board the election or re-election of each Director.
> Keeping the Board Succession Plan under review including the extension of David Bennett’s tenure as Board Chair and
recommending to the Board the appointment of Lucinda Charles-Jones and Petra van Hoeken as Remuneration
Committee Chair and Risk Committee Chair successor respectively.
> Initiating the search process to identify a candidate to succeed Tim Wade as Audit Committee Chair.
> Receiving updates on Executive Committee and senior management succession and talent management plans and
supported the appointment of new Executive Committee members including Gergely Zaborszky as Executive Director and
Chief Financial Officer to replace Clifford Abrahams.
> Recommending the appointment of Tracey Graham as a Non-Executive Director to the Board for approval.
> Reviewing corporate governance developments including the Governance Framework to apply upon completion of the
acquisition.
>Overseeing the Board Performance Review process, recommending to the Board an action plan to address key findings
and monitoring its progress.
> Monitoring progress being made on broadening diversity and inclusion across the Group including on the targets in the
Board Diversity and Inclusion Policy and the Group’s broader diversity, equity & inclusion agenda.
> Keeping the effectiveness of the workforce engagement programme under review.
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Governance report (continued)
Governance and Nomination Committee (continued)
In the context of the Governance and Nomination Committee’s work on the Board Succession Plan, during 2024 the
Committee, recognising that Tim Wade will reach his nine-year tenure in September 2025, initiated succession activity in
relation to the Chair of the Audit Committee role. In December 2024 the Committee agreed the appointment of Korn Ferry to
lead an external search and approved a role specification and search criteria. Korn Ferry was previously appointed to lead the
2023 Board performance review but has no other connection with the Group or individual Directors other than in the context of
some prior Board and executive recruitment and skill review projects including with Nationwide.
Principle 4 – Audit, Risk and Internal Control – “The board should establish formal and transparent policies and
procedures to ensure the independence and effectiveness of internal and external audit functions, satisfy itself on the
integrity of financial and narrative statements, presenting fair, balanced and understandable assessments of the
company’s position. It should establish procedures to manage risk, oversee the internal control framework, determine
the nature and extent of principal risks the company is willing to take in order to achieve its long-term strategic
objectives and the effective management of such risks.”
Internal control
The Group is committed to ensuring that it operates and maintains strong systems of internal control and maintains an internal
control framework which is designed to facilitate effective and efficient operations, ensure a high quality of internal and external
reporting, and ensure compliance with applicable laws and regulations. Owing to the limitations inherent in any internal control
framework, the controls have been designed to manage and mitigate, rather than eliminate, the risk of failure to achieve the
Group’s business objectives and can provide only reasonable, not absolute, assurance against material misstatement or loss.
The Board assumes overall responsibility for the Group’s systems of internal control and the effectiveness of these systems are
reviewed regularly by the Board Risk Committee and the Board Audit Committee. A review of the effectiveness of key controls
is regularly undertaken across the Group, providing an assessment and statement on the effectiveness of the control
environment. The Directors acknowledge their responsibilities in relation to the Group’s internal control framework and for
reviewing its effectiveness.
The Board confirms that throughout the reporting period and up to the date of approval of this Annual Report and Accounts,
there have been rigorous processes in place to identify, evaluate and manage the principal and emerging risks faced by the
Group, including those that would threaten its business model, future performance, solvency or liquidity, the likelihood of a risk
occurring and the costs of control in accordance with the Guidance on Risk Management, Internal Control and Related Financial
and Business Reporting published by the Financial Reporting Council.
The Board therefore remained satisfied that the systems of internal control continued to be effective in identifying and assessing
the various risks to the Group and in monitoring and reporting progress on their potential impact.
Audit Committee
The Audit Committee’s role is to review and evaluate the quality and integrity of the Group’s financial reporting, processes,
policies and disclosures, and to oversee and drive an effective and efficient financial control environment within the Group on
behalf of the Board. The Committee is responsible for monitoring and scrutinising the activities and effectiveness of the external
auditor (External Auditor) and the Internal Audit function and also reviews and monitors the Group’s whistleblowing procedures.
The Committee is comprised of the independent Non-Executive Directors, other than the Board Chair. Lucinda Charles-Jones
and Petra van Hoeken became Committee members on 22 January and 1 July 2024 respectively. Members possess relevant
financial and commercial experience and Tim Wade, Committee Chair, is deemed to have recent and relevant financial
experience.
The Board Chair, Chief Executive Officer, Chief Financial Officer, Chief Risk Officer, Head of External Reporting, Group Director
Internal Audit (GDIA) and a representative of the External Auditor, Ernst & Young LLP (EY), also attend all meetings. The
Committee invites others to attend for specific agenda items to provide additional input as required.
The Committee charter, which sets out more details on the Committee’s scope and responsibilities is available on The Group’s
website.
During the reporting period the Committee held nine scheduled meetings and one additional meeting focusing on interim
reporting. Private sessions of the Committee with only members present took place before a number of meetings with the
External Auditor or GDIA attending as required.
In recognising the common interest in issues relevant to both the Committee and the Risk Committee, three joint Audit and
Risk Committee meetings were also held in the reporting period where matters including the Annual Report and Accounts and
Pillar 3 disclosures were discussed and recommended to the Board, and the Risk Management Assurance Plan and Internal
Audit Plan were discussed and approved.
97
Governance report (continued)
Audit Committee (continued)
In October 2023 PricewaterhouseCoopers LLP (PwC) was appointed as the Group’s External Auditor following a
comprehensive audit tender process overseen by the Committee. In March 2024, PwC gave notice that they would be resigning
as the Group’s External Auditor with effect from 19 March 2024 in light of potential conflicts arising in relation to the acquisition
as announced on 7 March 2024. EY was reappointed by the Board in April 2024 to fill the resulting vacancy. The Committee
provided oversight of the transition to PwC and the reappointment of EY.
For further detail on the External Auditor, its independence and remuneration please see ’The Auditor’ section on page 104.
During the reporting period, the key activities of the Committee were:
> Reviewing the integrity and quality of the Group’s published financial information including assessing whether the annual
and interim results were fair, balanced and understandable.
> Reviewing climate-related reporting, including the assessment of risks and opportunities, potential impacts to the financial
statements and the strategy to net zero.
> Reviewing material accounting estimates and judgements and the use and explanation of alternative performance
measures including the review and challenge of the level of ECL impairment provisioning, the underpinning assumptions
and the level of management adjustments included within the ECL impairment allowance.
> Monitoring and challenging the design and progress of plans intended to evolve and adapt the Group’s IFRS 9 approach
and processes to enhance and rationalise the model landscape.
> Reviewing and challenging the going concern assessment including the assessment of the Group’s capital, liquidity and
funding position and consideration of principal risks and uncertainties.
> Assessing the effectiveness of the external audit process and External Auditor performance; approving the annual
external audit plan, receiving updates on the progress of the audit and reviewing the findings of the external audit and
management’s responses to findings.
> Considering, challenging, approving and monitoring the Internal Audit plan, including any material changes and progress
towards its delivery and considering regular reports from Internal Audit on activities undertaken, including a six-monthly
assessment of the Group’s governance, risk and control frameworks.
> Conducting an annual assessment of the independence and performance of the GDIA and reviewing the adequacy,
effectiveness, objectivity, independence and influence of the Internal Audit function and assessing the adequacy of Internal
Audit’s resources and skills and whether it obtains the appropriate level of access to management and information. The
Committee concluded that the Internal Audit Function was independent and sufficiently resourced and skilled to meet its
accountabilities.
> Providing oversight of the Group’s compliance with all necessary regulatory reporting and the requirements and
recommendations of external regulators including monitoring progress against the recommendations identified in the s.166
Skilled Persons Review produced for the PRA in connection with regulatory capital reporting.
>Receiving and considering biannual whistleblowing reports covering the whistleblowing arrangements, including
monitoring trends in reported and substantiated whistleblowing cases, the activity to ensure colleagues are aware of the
Whistleblowing Programme and regulatory and industry developments.
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Governance report (continued)
Risk Committee
The Risk Committee’s role is to assist the Board to set the Group’s risk appetite and to ensure that the Group maintains an
effective Risk Management Framework. The Committee is responsible for assessing the principal and emerging risks facing the
Group, including their management and mitigation; exercising oversight over the effectiveness of the Risk (including
Compliance) function; and leading the development and embedding of a culture that supports risk awareness and the fair
treatment of customers.
The Committee is comprised of the independent Non-Executive Directors, other than the Board Chair. Lucinda Charles-Jones
became a committee member on 22 January 2024 and Petra van Hoeken succeeded Geeta Gopalan as Committee Chair on 1
July 2024. The Board Chair, Chief Executive Officer, Chief Financial Officer, Chief Risk Officer, Chief Operating Officer and
GDIA regularly attend Committee meetings. The External Auditor is also invited to be represented at all meetings. The
Committee invites others to attend for specific agenda items to provide additional input as required.
The Committee charter, which sets out more details on the Committee’s scope and responsibilities is available on the Group’s
website.
During the reporting period, eleven scheduled meetings were held along with five additional meetings to consider and
recommend the ICAAP and ILAAP documents to the Board for approval. Private sessions of the Committee took place before
each scheduled meeting with the Chief Risk Officer attending as required.
During the reporting period, the key activities of the Committee were:
> Reviewing the performance of the Risk function and providing oversight of the Group’s operational readiness and risk
management capabilities, systems and practices in support of strategic projects and initiatives. This included considering
the outcomes of assessments of risk culture and awareness in the Group focusing on the attitudes and behaviours of
colleagues in relation to risk awareness, risk taking, risk management and controls that shape decisions on risk.
> Monitoring the Group’s overall risk profile and reviewing and challenging progress and planning to mitigate the principal
risks and emerging risk exposures. This included key risks and associated monitoring metrics in relation to the proposed
acquisition.
> Regularly reviewing Tier 1 RAS breaches and triggers including, as required, remediation plans presented by the first line
of defence and related opinions from the second line of defence; recommending to the Board for approval ad hoc updates
to the Tier 1 RAS metrics.
> Holding deep dive sessions to review analysis on the Group’s Residential mortgages, Consumer and Business credit
portfolios which included portfolio resilience, asset quality, emerging risks and credit loss expectations.
> Reviewing the output of assessments regarding the effectiveness of controls in key risk areas and updates on progress
made in areas where enhancements or actions were required.
> Considering updates on progress, issues and themes arising and ongoing actions in respect of the Risk Assurance Plan
which consists of thematic and ongoing assurance reviews across key risk areas.
> Regularly reviewing updates from the Chief Operating Officer on developments to address key areas of risk within her
remit including fraud and financial crime risk, technology and cyber risk and operational resilience in respect of Important
Business Services and readiness for the SS1/21 Operational Resilience: Impact tolerances for important business services
regulation.
> Monitoring the Group’s progress against the requirements of the PRA Supervisory Statement on Model Risk
Management (MRM) for Banks (SS1/23) which included, among other things, carrying out a self-assessment exercise on
MRM policy and frameworks and developing a related remediation plan to support compliance;
> Reviewing and recommending the ICAAP, ILAAP, Recovery Plan and Resolvability Assessment Framework to the Board
for approval and overseeing capital, liquidity and market risks.
> Reviewing risk adjustment proposals to be recommended for consideration by the Remuneration Committee when
making remuneration decisions and approving the submission of related regulatory disclosures for submission to the PRA.
99
Governance report (continued)
Principle 5 – Remuneration – “Remuneration policies and practices should support strategy and promote long-term
sustainable success, with executive remuneration being aligned to purpose, values and successful delivery of the
long-term strategy and developed in accordance with formal and transparent procedures, ensuring no director is
involved in deciding their own remuneration outcome. Directors should exercise independent judgement and
discretion when authorising outcomes, taking account of company and individual performance, and wider
circumstances.”
Remuneration Committee
The Remuneration Committee is responsible for providing oversight and advice to the Board in relation to Group’s remuneration
policy; considering and implementing remuneration arrangements of the Board Chair and members of the Executive Committee;
and considering and approving remuneration arrangements for other senior executives and employees covered by the
Remuneration Code while having oversight for remuneration scales and structure across the Group.
The Committee is comprised of the independent Non-Executive Directors. Lucinda Charles Jones joined the Committee as a
member on 22 January 2024 becoming Committee Chair on 1 March 2024 and Petra van Hoeken became a member on 1 July
2024.
The Chief Executive Officer, Group Chief People and Communications Officer and Head of Reward and Employee Relations
also attend all meetings, except when issues relating to their own remuneration are being discussed or decided. A representative
of the Committee’s independent remuneration advisor, Deloitte LLP, also attends Committee meetings as appropriate
depending on the Committee’s business. The Committee invites others to attend for specific agenda items to provide additional
input as required.
The Committee charter, which sets out more details on the Committee’s scope and responsibilities is available on the Group’s
website.
During the reporting period, the Committee held eleven scheduled meetings and five additional meetings focusing on fixed and
variable remuneration matters including in connection with the acquisition. Private sessions of the Committee with only
members present took place before several meetings.
The Committee Chair continued the practice of hosting annual colleague engagement sessions focusing on remuneration
topics, the key themes from which were reported to the Committee including the action to be taken in response which the
Committee kept in mind throughout its decision making.
During the reporting period, the key activities of the Committee were:
> Confirming at least annually the Material Risk Taker (MRT) population.
> Reviewing and approving the All-Colleague Remuneration Policy, salary proposals for Executive Directors and MRTs and
approving the annual pay budget.
> Reviewing and approving variable pay scorecard performance measures and targets for the 2024 and 2025 variable pay
arrangements; approving the performance outcome of the 2020, 2021, 2022 and 2023 Long-Term Incentive Plan awards
> Approving variable remuneration arrangements and awards for Executive Directors, MRTs, Risk and Internal Audit
control functions and for the VMUK Team Bonus.
> Discussing and approving the approach to deferred variable pay arrangements for all colleagues to apply pre and post
completion of the acquisition including the Matrix of Remuneration Arrangements to operate between the Group and
Nationwide.
> Approving remuneration arrangements for exiting and incoming Executive Directors and Executive Committee members
and approving MRT termination and commencement awards.
> Recognising the increase in retention risk likely during the period of uncertainty and change associated with the
acquisition and the need to retain critical skills to ensure safe and sound continuity of business operations, approving a
Retention Policy.
> Ensuring appropriate consideration of risk, including corporate risks and conduct risks and approved any corporate or
individual risk adjustments to variable pay.
> Approving the Directors’ remuneration report for inclusion in the 2023 Annual Report and Accounts.
> Approving regulatory reporting during the period and reviewing Internal Audit assurance of compliance to regulatory
requirements.
> Considering 2024 gender and ethnicity pay gaps and Equal Pay across all colleagues; reviewing progress on the Group’s
diversity targets and considering how the Group’s remuneration policies and practices deliver fair outcomes for colleagues
across all protected characteristics.
100
Governance report (continued)
Remuneration Committee (continued)
The Directors’ remuneration policy as applied remains materially unchanged from that which was approved by the Group’s
shareholders at the 21 February 2023 AGM. However, following completion of the acquisition certain aspects of the Policy are
subject to the oversight of the Nationwide Remuneration Committee in line with the Matrix of Remuneration Arrangements in
place.
In line with Schedule 5 of the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008,
information pertaining to the emoluments for the highest paid director and total amount of directors’ remuneration (aggregated)
are included in note 5.3 of the consolidated financial statements.
101
Report of the Directors
The Directors of the Company and its subsidiary undertakings (which together comprise the ‘Group’) submit their report and
consolidated financial statements for the period ended 31 March 2025.
Directors
The list of current Group Directors can be found on page 80. Changes to the composition of the Board since 1 October 2023 up
to the date of this report are shown in the table below.
Name
Role
Date of appointment
Date of resignation
Clifford Abrahams
Executive Director
15 December 2024
Lucinda Charles-Jones
Independent Non-Executive Director
22 January 2024
David Duffy
Non-Executive Director
1 October 2024
Geeta Gopalan
Independent Non-Executive Director
30 June 2024
Tracey Graham
Independent Non-Executive Director
23 January 2025
Petra van Hoeken
Independent Non-Executive Director
1 July 2024
Darren Pope
Independent Non-Executive Director
1 October 2024
Chris Rhodes
Executive Director
1 October 2024
Sara Weller
Non-Executive Director
1 October 2024
Gergely Zaborszky
Executive Director
4 March 2025
Appointment and retirement of Directors
The appointment, retirement and/or replacement of Directors is governed by the Company’s Articles of Association (Articles) the
Code and the Companies Act 2006. In line with the requirements of the Code, all Directors will submit themselves for election or
re-election as appropriate at the next AGM.
Directors’ indemnities and insurance
The Directors have each entered into individual deeds of access, insurance and indemnity with the Group which indemnify the
Directors to the maximum extent permitted by law. Each such provision constitutes a ‘third-party indemnity provision’ and a
‘qualifying indemnity provision’ for the purposes of the Companies Act 2006. These provisions are in force for the benefit of the
Directors at the date of this report, and during the period to which this report relates. Such deeds are available for inspection at
the Group’s registered office.
The Group has an insurance policy in place for the benefit of all trustees, colleagues, Directors, officers, members and partners
of the Group while acting in the capacity of a trustee or administrator of employee benefit or pension plans. This policy
indemnifies the Directors, trustees and administrators of the occupational pension schemes operated by the Group, against
liability incurred by them in connection with the management and administration of the pension schemes. This insurance policy
constitutes a ‘pension scheme indemnity provision’ and a ‘qualifying indemnity provision’ for the purposes of the Companies Act
2006. These provisions are in force for the benefit of the Directors of Trustee Companies at the date of this report, and during
the period to which this report relates. Such policy is available for inspection at the Group’s registered office.
In addition, the Group had appropriate Directors’ and Officers’ Liability Insurance cover in place throughout the reporting period
which, following completion of the acquisition, is provided by the Nationwide Directors’ and Officers’ Liability insurance policy.
Profits and dividends
The Group profit before tax for the period amounted to £149m (12 months to 30 September 2023 (restated) £357m). The profit
attributable to the ordinary shareholders for the period amounted to £10m (12 months to 30 September 2023 (restated):
£181m). As at 31 March 2025, the distributable reserves of the Company were £1,065m (30 September 2023: £1,044m). The
Directors approved an interim dividend in respect of the 12 month interim period ending 30 September 2024 of 2.0p per
ordinary share in the Company which was paid on 30 July 2024. The directors do not propose a final dividend in respect of the
period.
102
Report of the Directors (continued)
Share capital, control and Directors’ powers
Prior to the Scheme becoming Effective on 1 October 2024, Ordinary Shares in the Company were listed on both the London
Stock Exchange (LSE) and the Australian Securities Exchange (ASX) (in the form of CDIs). The Company was required to
comply with the disclosure requirements of the LSE and also of the ASX insofar as they related to the Company’s foreign
exempt listing in Australia. Following the Scheme becoming Effective, the Company’s Ordinary Shares were delisted from the
Official List and the trading of the Company’s Ordinary Shares on the LSE main market for listed securities was cancelled with
effect from 1 October 2024. The listing of Company’s Ordinary Shares (in the form of CDIs) was cancelled on the ASX with
effect from 1 October 2024.
There are no restrictions on voting rights of securities in Virgin Money.
Subject to the Articles and provisions of relevant statutes, the Board may exercise all powers of Virgin Money. Virgin Money can
only amend the Articles if its shareholders pass a special resolution to this effect.
Acquisition of own shares and share buyback programme
At the Group’s AGM held on 1 March 2024 a resolution was passed that the Directors were authorised to purchase up to a
maximum of 206,135,208 Ordinary Shares representing approximately 14.99% of the issued ordinary share capital.
Details of the share buyback programme can be found in Note 4.1.1 of the consolidated financial statements.
Each buyback described in Note 4.1.1 has been effected in accordance with the scope of the authority to repurchase ordinary
shares conferred on Virgin Money either at its 17 February 2022 AGM, 21 February 2023 AGM or 1 March 2024 AGM,
Regulation (EU) No 596/2014 (the Market Abuse Regulation), the Commission Delegated Regulation (EU) 2016/1052 (both
form part of Retained EU Law as defined in the European Union (Withdrawal) Act 2018) and Chapter 12 of the Listing Rules
and was still valid as at 7 March 2024, when the Buyback Programme suspended. Each share buyback programme was
approved by the PRA.
Employee Benefit Trusts
The Group operates employee benefit trusts (EBTs), which hold ordinary shares on trust for the benefit of employees and
former employees of the Group, and their dependants, and which is used in conjunction with the Group’s employee share
schemes. While ordinary shares are held in the EBTs, the voting rights in respect of these ordinary shares are exercised by the
trustees of the EBTs. Following the acquisition no new awards will be granted under the Group’s employee share schemes but
the EBTs continue to be used in the process of satisfying outstanding awards to MRTs.
Prior to the scheme effective date, where participants in an employee share incentive plan operated by the Group were the
beneficial owners of shares but not the registered owners, the voting rights were normally exercised at the discretion
of participants.
With the exception of restrictions on transferring ordinary shares under Virgin Money’s share incentive plan when it was in
operation, there are no restrictions that exist on transferring or holding securities in Virgin Money under the Articles and there
are no shares carrying special rights in respect of the control of Virgin Money.
103
Report of the Directors (continued)
Change of control
The Group is not party to any significant agreements that are subject to change of control provisions in the event of a takeover
bid, other than the following:
A Trade Mark Licence Agreement with Virgin Enterprises Limited (Virgin Enterprises) under which Virgin Enterprises has
granted a licence to the Group to use the ‘Virgin’ and ‘Virgin Money’ trademarks. Virgin Enterprises has the right to terminate
the agreement within 30 days of a change of control of the Group unless it is a Permitted Change of Control. A Permitted
Change of Control is one arising from (a) an IPO on a recognised stock exchange or (b) any other sale of shares of Virgin
Money which has been pre-approved by Virgin Enterprises in writing. Virgin Enterprises can withhold consent only in the event
that the third-party purchaser is a direct competitor of Virgin Enterprises or another Virgin licensee in the UK, or it is involved in
any activity or possesses a reputation or financial standing which would be likely to materially damage the value or reputation of
the Virgin brand.
Substantial shareholdings
The Group is a wholly owned subsidiary of Nationwide. The Directors ensure that the strategy, priorities, processes and
practices of the Group are fully aligned where required to those of Nationwide, ensuring that the interests of Nationwide as
Virgin Money’s sole shareholder are duly acknowledged. Further information in respect of the relationship of Nationwide with its
members is included within the Strategic report within the Nationwide Building Society Group 2025 Annual Report and Accounts
available on the Nationwide website (www.nationwide.co.uk).
Streamlined Energy and Carbon Reporting
The Group has taken advantage of the exemption from Streamlined Energy and Carbon Reporting (SECR) reporting
requirements in its Directors’ report as it is covered by the Nationwide SECR report in the Nationwide Building Society Group
2025 Annual Report and Accounts, available on the Nationwide website (www.nationwide.co.uk).
Political donations
The Group did not give any money for political purposes, nor did it make any political donations to political parties or other
political organisations, or to any independent election candidates, or incur any political expenditure during the reporting period.
At the Group AGM on 1 March 2024, shareholders gave authority under Part 14 of the Companies Act 2006 to make political
donations and incur political expenditure up to a maximum of £100,000. This authorisation was sought for prudence as it is the
Group’s policy not to make any political donations to political parties or incur political expenditure within the ordinary meaning of
those words. Given the wide definition of donations and expenditure within the Companies Act 2006, activities which form part
of the regular operations of the Group such as communicating with government at local and national level and funding events to
which politicians are invited, may be covered.
Financial risk management objectives and policies
Information about internal controls and financial risk management systems relating to financial reporting and Board review can
be found on page 96 of the Governance report.
Information regarding financial risk management objectives and policies in relation to the use of financial instruments can be
found in the Risk report on pages 8 to 79.
Post-balance sheet events
There have been no significant events between 31 March 2025 and the date of approval of the annual report and consolidated
financial statements which would require a change to or additional disclosure in the financial statements.
Information incorporated into the Directors’ report by cross reference
The following information that would otherwise be required to be disclosed in this report and which is incorporated into this
report by reference can be found on the following pages
Subject
Page reference
Corporate Governance Statement
80
Future developments
3-7
Equality of employment opportunities
84-85, 91-93
Principal risks and uncertainties
6-7
Going concern
The Group’s Directors have made an assessment of the Group’s ability to continue as a going concern and are satisfied that the
Group has the resources to continue in business for the foreseeable future.
The Group’s use of the going concern basis for preparation of the accounts is discussed in note 1.3 of the Group’s consolidated
financial statements.
104
Report of the Directors (continued)
Research and development activities
The Group does not undertake formal research and development activities although it does invest in products and services in
each of its business lines in the ordinary course of business. In addition to new products and services the Group also invests in
internally generated intangible assets including software and computer systems. Further details can be found in note 3.2 of the
consolidated financial statements.
The Auditor
The Audit Committee reviews the appointment of the statutory auditor, including monitoring the use of the statutory auditor for
non-audit services and the balance of audit and non-audit fees paid to them. More details on this can be found in note 2.5 to the
financial statements. Details of the reappointment of EY and oversight of the External Auditor by the Audit Committee is set out
on page 97.
The Group is in compliance with the requirements of The Statutory Audit Services for Large Companies Market Investigation
(Mandatory Use of Competitive Tender Processes and Audit Committee Responsibilities) Order 2014, which relates to the
frequency and governance of tenders for the appointment of the statutory auditor and the setting of a policy on the provision of
non-audit services. In September 2024 the Group applied to the Financial Reporting Council to request a two-year extension to
the maximum duration of audit as permitted under the Companies Act 2006 to enable EY to remain as the Group External
Auditor to provide stability through the pre and post-acquisition period, preserve auditor independence and allow due time for
agreeing future audit plans with Nationwide. This extension means that a new Group external auditor will be in place in respect
of the statutory audit for the financial year commencing 1 April 2027.
105
Statement of Directors’ responsibilities
The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable UK
law and regulations.
Company law requires the Directors to prepare financial statements for each financial period. Under that law the Directors have
elected to prepare the Group financial statements in accordance with UK-adopted International Accounting Standards (IASs) in
conformity with the requirements of the Companies Act 2006. Under company law the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Company and
of the profit or loss of the Group and the Company for that period.
The Group financial statements have also been prepared with regard to the FCA’s Disclosure Guidance and Transparency
Rules.
In preparing these financial statements the Directors are required to:
•
select suitable accounting policies in accordance with IAS 8: Accounting Policies, Changes in Accounting Estimates
and Errors and then apply them consistently;
•
present information, including accounting policies, in a manner that provides relevant, reliable, comparable and
understandable information;
•
provide additional disclosures when compliance with the specific requirements in IFRSs is insufficient to enable users
to understand the impact of particular transactions, other events and conditions on the Group financial position and
financial performance;
•
state whether UK adopted IASs in conformity with the requirements of the Companies Act 2006 have been followed,
subject to any material departures disclosed and explained in the financial statements;
•
make judgements and accounting estimates that are reasonable; and
•
prepare the financial statements on the going concern basis unless it is appropriate to presume that the Company
and/or the Group will not continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group’s and
Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Group and enable them
to ensure that the Group financial statements comply with the Companies Act 2006. They are also responsible for safeguarding
the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for preparing a Strategic report and Directors’ report
that comply with that law and those regulations. The Directors are responsible for the maintenance and integrity of the corporate
and financial information included on the Company’s website.
The directors confirm, to the best of their knowledge:
•
that the consolidated financial statements, prepared in accordance with UK adopted IASs, give a true and fair view of
the assets, liabilities, financial position and profit of the Company and undertakings included in the consolidation taken
as a whole;
•
that the Annual Report and Accounts, including the Strategic report, includes a fair review of the development and
performance of the business and the position of the Company and undertakings included in the consolidation taken as
a whole, together with a description of the principal risks and uncertainties that they face; and
•
that they consider the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and
provides the information necessary for the shareholder to assess the Company’s position, performance, business
model and strategy.
Independent auditor and audit information
The Directors who were members of the Board at the time of approving the Report of the Directors are listed on page 80.
Having made enquiries of fellow Directors and of the Group’s auditor, each of these Directors confirms that:
• to the best of each Director’s knowledge and belief, there is no information relevant to the preparation of their report of which
the Group’s auditor is unaware; and
• each Director has taken all the steps a Director might reasonably be expected to have taken to be aware of relevant audit
information and to establish that the Group’s auditor is aware of that information.
In accordance with section 485 of the Companies Act 2006, a resolution to appoint Ernst & Young LLP as External Auditor, and
to authorise the Audit Committee to agree the remuneration of the External Auditor, will be proposed at the 2025 AGM.
Lorna McMillan
Group Company Secretary
29 May 2025
Virgin Money UK PLC. Registered No. 09595911
106
Independent auditor’s report to the members of Virgin Money UK PLC
Opinion
In our opinion:
•
Virgin Money UK PLC’s Group financial statements and parent company financial statements (the “financial
statements”) give a true and fair view of the state of the Group’s and of the parent company’s affairs as at 31 March
2025 and of the Group’s profit for the period 1 October 2023 to 31 March 2025 (“the period”);
•
the Group financial statements have been properly prepared in accordance with UK adopted international accounting
standards;
•
the parent company financial statements have been properly prepared in accordance with UK adopted international
accounting standards as applied in accordance with section 408 of the Companies Act 2006; and
•
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements of Virgin Money UK PLC (the ‘parent company’) and its subsidiaries (the ‘Group’) for
the period ended 31 March 2025 which comprise:
Group
Parent company
Consolidated balance sheet as at 31 March 2025
Balance sheet as at 31 March 2025
Consolidated income statement for the period then
ended
Statement of changes in equity for the period then ended
Consolidated statement of comprehensive income for
the period then ended
Cash flow statement for the period then ended
Consolidated statement of changes in equity for the
period then ended
Related notes 6.1 to 6.6 to the financial statements including
material accounting policy information
Consolidated statement of cash flows for the period
then ended
Related notes 1.1 to 5.7 to the financial statements,
including material accounting policy information
Information identified as “audited” within the Risk
report
The financial reporting framework that has been applied in their preparation is applicable law and UK adopted international
accounting standards and as regards to the parent company financial statements, as applied in accordance with section 408 of
the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial
statements section of our report. We are independent of the Group and parent company in accordance with the ethical
requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied
to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
107
Independent auditor’s report to the members of Virgin Money UK PLC
(continued)
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate. Our evaluation of the directors’ assessment of the Group and parent
company’s ability to continue to adopt the going concern basis of accounting included the following procedures:
•
We obtained management’s going concern assessment for the Group, including forecasts for the going concern period
covering at least 12 months from when the financial statements are authorised for issue, and compared historical
budgeted financial information with actual results to form a view of the reliability of the forecasting process;
•
We evaluated the impacts on going concern as a result of the completion of the Nationwide acquisition, including the
wider integration programme and potential Part VII outcomes. We used the approved board forecasts and evaluated
whether this appropriately considered any potential impacts which may arise as a result of the strategic review being
undertaken by Nationwide. We obtained and evaluated representations from management that there is no intention to
terminate the businesses of the Group in the going concern period.
•
We used EY economic and valuation specialists to assess certain forecasted assumptions which include, growth,
inflation and interest rates;
•
Management has modelled reasonable adverse scenarios in order to incorporate unexpected changes to forecasted
liquidity and capital positions of the Group. We reviewed these scenarios, including a consideration of the Group’s
operational resilience, to identify whether they indicated significant issues that might impact the Group’s ability to
continue as a going concern;
•
We evaluated the results of management’s stress testing, including reverse stress testing, to assess the economic
assumptions and their impact on the Group’s solvency and liquidity;
•
We reviewed regulatory correspondence and committee and board meeting minutes to identify events or conditions
that may impact the Group’s ability to continue as a going concern;
•
We understood the directors considerations of the current uncertain geopolitical and economic outlook and climate
change, including both financial risks and impacts on operational resilience; and
•
We read and evaluated the adequacy of the disclosures in the Annual report in relation to going concern and
considered whether there were other events subsequent to the balance sheet date which could have a bearing on the
going concern conclusion.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the Group and parent company’s ability to continue as a going concern
for a period of 12 months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections
of this report. However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the
Group’s ability to continue as a going concern.
Overview of our audit approach
Audit scope
•
We performed an audit of the complete financial information of the Group and parent company.
Clydesdale Bank PLC is the most significant component in the Group.
Key audit
matters
•
Impairment of loans
•
Revenue recognition – Effective interest rate method of accounting
•
Value of unquoted pension assets
•
Transaction related matters
•
Access management
Materiality
•
Overall Group materiality of £31m which represents 5% of the profit before tax adjusted for non-
recurring items.
108
Independent auditor’s report to the members of Virgin Money UK PLC
(continued)
An overview of the scope of the parent and group audits
Tailoring the scope
We have followed a risk-based approach when developing our audit approach to obtain sufficient appropriate audit evidence on
which to base our audit opinion. We performed risk assessment procedures to identify and assess risks of material
misstatement of the Group and parent company financial statements and identified significant accounts and disclosures. When
identifying the extent to which the audit work needed to be performed to respond to the identified risks of material misstatement
of the Group and parent company financial statements, we considered our understanding of the Group and its business
environment, the potential impact of climate change, the applicable financial framework, the Group’s system of internal control
at the entity level and relevant internal audit results.
Climate change
Stakeholders are increasingly interested in how climate change will impact Virgin Money UK PLC. The Group has determined
that the most significant future impacts from climate change on their operations will be from physical and transitional risks and
has concluded that these are medium to longer term in nature. These are explained on page 79 in the Risk Report which forms
part of “Other information”, rather than the audited financial statements. Our procedures on these unaudited disclosures
therefore consisted solely of considering whether they are materially inconsistent with the financial statements or our knowledge
obtained in the course of the audit or otherwise appear to be materially misstated, in line with our responsibilities on “Other
information”.
In planning and performing our audit we assessed the potential impacts of climate change on the Group’s business and any
consequential material impact on its financial statements.
As explained in note 1.5 to the Annual Report and Accounts, the Group has made an assessment of the observable effect of
the identified physical and transitional risks on the Group’s lending portfolio, as well as other assets such as the deferred tax
asset and the pension assets held by the Group’s defined benefit pension scheme. Whilst the effects of climate change
represent a source of material uncertainty, the effects on estimates and judgements related to financial reporting arise in the
medium and longer term. Management has concluded that while the effects of climate change represent a source of significant
uncertainty, the Group does not consider there to be a material impact on its estimates and judgements from physical and
transition risks of climate change in the financial statements. The financial statements cannot capture all possible future
outcomes as these are not yet known and the degree of certainty of these changes may also mean that they cannot be taken
into account when determining asset and liability valuations and the timing of future cash flows under the requirements of UK
adopted international accounting standards.
The Group has explained in the critical accounting estimates and judgements note 1.5 the articulation of how climate change
has been reflected in the financial statements. Significant judgements and estimates relating to climate change are included in
note 1.5. These disclosures explain that risks are still developing, and the degree of certainty of these changes means that they
cannot be taken into account when determining the financial statement impact.
Our audit effort in considering the impact of climate change on the financial statements was focused on evaluating
management’s assessment of the impact of climate risk, physical and transition, and ensuring that the effects of material climate
risks disclosed in note 1.5 have been appropriately reflected in the areas of judgement and estimation where relevant. We also
challenged the directors’ considerations of climate change risks in their assessment of going concern and associated
disclosures.
Based on our work we have considered the impact of climate change on the financial statements to impact certain key audit
matters. Details of our procedures and findings are included in our explanation of key audit matters below.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to
fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation
of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our
audit of the financial statements as a whole, and in our opinion thereon, and we do not provide a separate opinion on these
matters.
109
Independent auditor’s report to the members of Virgin Money UK PLC
(continued)
Risk
Our response to the risk
Impairment of loans:
Consolidated balance sheet impairment of loans - £735m
(2023:£612m)
Consolidated income statement charge - 18 month period
ending 31 March 2025: £429m (12 month period ending 30
September 2023: £309m)
Please refer to page 11 (credit risk report) and note 3.1.1.1
(Impairment provisions on credit exposures note).
The degree of subjectivity in the assumptions and estimates
used by management to measure IFRS 9 ECL is high due to
significant uncertainty associated with the assumptions used.
These include the impacts of the uncertain geopolitical and
economic
outlook,
a
higher
for
longer
interest
rate
environment, a protracted period of inflation that is above the
UK Government policy target, stresses on recoverable values,
and potential impacts of climate change, which were all
considered in our risk assessment.
The risk of material misstatement within the measurement and
timing of IFRS 9 ECL manifests itself across the following five
areas:
Staging:
The
qualitative
and
quantitative
criteria
applied
by
management may not completely and accurately identify a
significant increase in credit risk or credit impairment on a
timely basis.
Modelling:
Models that calculate the ECLs, including probability of default
(“PD”), loss given default (“LGD”) and exposure at default
(“EAD”) models, may not appropriately apply accounting
interpretations, modelling assumptions, or data, or may not be
appropriately implemented.
Multiple Economic Scenarios (“MES”):
ECLs may be inaccurate because the range of scenarios
considered and the probability weightings applied to them are
not sufficient or appropriate to capture all relevant factors
required, including the uncertain geopolitical and economic
outlook, higher for longer interest rates and protracted period
of inflation, or because the MES may not be incorporated
appropriately into the estimation of PD, LGD, and EAD.
In-Model and Post Model Adjustments (“PMAs”):
In-model and post-model adjustments could be inappropriate,
incomplete, or in the case of in-model adjustments, incorrectly
incorporated into the PD, LGD, and EAD models, with
consideration to the risk of management override. These
adjustments
are
inherently
uncertain,
significant,
and
subjective management judgement is often involved in
identifying and estimating certain adjustments, including the
appropriate criteria for release.
We developed a detailed understanding of the Group’s
accounting policies to ensure they remained compliant with
the requirements of IFRS 9. We have assessed the changes
in management’s methodology following alignment with
Nationwide.
We evaluated the Group’s design of controls across the
processes relevant to ECL, including the controls relating to
the approval of key judgements and development of the
estimate.
Staging:
We assessed the appropriateness of the Group’s staging
criteria including the application of qualitative and quantitative
criteria and their logical application through the modelled
environment.
We reperformed staging on all portfolios that we determined to
be of a higher risk. This was done by independently replicating
the staging and re-running the results in our own environment.
Modelling:
We assessed the assumptions and performed testing over
inputs and formulae used in a risk-based sample of ECL
models with involvement of our internal credit modelling
specialists. This included assessing the appropriateness of
model design and the calculations used, an assessment of
model performance and recalculating Probability of Default,
Loss Given Default and Exposure at Default for a risk-based
sample of portfolios.
We performed testing over completeness and accuracy of
data used in the ECL models and calculation by reconciling,
and performing sample tests of key data fields used in the
model, to source data and corroborative evidence. We
independently recalculated risk ratings for a sample of
performing and non-performing business loans and compared
to the Group’s determinations.
Multiple Economic Scenarios (“MES”):
We assessed the base case and alternative economic
scenarios adopted by management utilising EY economic
specialists. We challenged the probability weightings ascribed
to the scenarios and compared them to other scenarios from a
variety of external sources. With the assistance of EY
economic
specialists,
we
assessed
whether
forecast
macroeconomic variables were appropriate loan loss provision
drivers, and that the forecast variables were reasonable in the
context of current economic conditions.
In-Model and Post Model Adjustments (“PMAs”):
We performed testing of model adjustments and PMAs, with
the support from our credit modelling specialists. We
assessed the completeness and appropriateness of these
adjustments. Our procedures included assessing the need for
management adjustments, evaluating the data, assumptions,
methodology
and
judgements
used.
Additionally,
we
performed a benchmarking exercise by comparing the suite of
model adjustments recognised by management to those seen
in the industry.
110
Independent auditor’s report to the members of Virgin Money UK PLC
(continued)
Risk
Our response to the risk
Individually impaired assets:
Individual impairment within the commercial and business
lending portfolios may not be identified on a timely basis or the
provisions recognised may be incorrectly measured
considering the impact of geopolitical tensions on exit
strategies, collateral valuation and time to collect.
Individually impaired assets:
With the support of our valuation specialists, we recalculated
ECL provisions for a sample of individually assessed loans
including comparing to alternative scenarios and challenging
probability weightings assigned.
We also assessed a sample of individual loans classified as
performing loans within higher risk sectors, where no specific
provision was held to determine whether their stage
classification was appropriate.
Overall stand-back assessment:
We performed a stand-back assessment of the ECL
provisions and coverage at an overall level and by stage to
determine if changes were reasonable and internally
consistent by considering the overall credit quality of the
Group’s portfolios, their risk profile, and the impacts of the
current uncertain geopolitical and economic outlook and
climate change. We performed peer benchmarking where
available to assess overall staging and provision coverage
levels.
Key observations communicated to the Audit Committee
We communicated that we were satisfied that ECL provisions were reasonable and in compliance with the requirements of
IFRS 9.
We communicated that our independent testing of models and underlying modelling assumptions resulted in only minor
differences that were considered to be immaterial in the aggregate.
We also communicated that our challenge of the forecast macroeconomic variables and the base, downside, severe downside
and upside scenarios, together with weightings adopted by management and concluded that they were reasonable.
Our testing of recorded managements’ adjustments confirmed they had been accurately recorded, aligned with methodology
adopted by the parent, and we were satisfied that their use was complete and appropriate.
Our testing of data used in the ECL models confirmed its completeness, appropriateness and accuracy.
We communicated that the overall ECL was considered reasonable.
111
Independent auditor’s report to the members of Virgin Money UK PLC
(continued)
Risk
Our response to the risk
Revenue recognition – effective interest rate method
Total interest income – 18 month period ending 31 March
2025 £7,042m (Restated 12 month period ending 30
September 2023: £3,905m)
Please refer to note 2.1 Net Interest Income for the
Group’s disclosures in relation to EIR.
The Group records income on financial instruments under the
effective interest rate (‘EIR’) method.
The most material adjustments to interest income under EIR
accounting are made in respect of the Group’s mortgage
portfolios.
Significant management judgement is required to forecast
cashflows; which in turn are derived from expected customer
behaviour over the life of the financial instrument.
Mortgage EIR adjustments are sensitive to the following
assumptions:
•
The period over which to defer eligible fees and
costs, which is determined by reference to analysis of
historical customer behaviours; and
•
The extent to which early redemption charges
(“ERCs”) and variable interest expected to be
collected in the future should be recognised as
revenue/assets upfront.
The complexity of calculations, the degree of management
judgement in respect of forecast future cashflows, and the
sensitivity of the amounts recognised in the financial statements
to the assumptions increases the risk of material misstatement.
We assessed the Group’s revised policies in relation to the
application of EIR adjustments for compliance with the
requirements of IFRS 9. We gained an understanding of the
key processes, controls, assumptions and judgements used
within the Group’s EIR calculations. We took a substantive
approach to testing the EIR models which are applied to that
revenue, and the related balances.
We tested the data used within the EIR models, including
historical data used to analyse customer behaviours. We
involved EY model risk specialists in assessing the code used
to extract historical data from the mortgage systems as part of
our work to verify that the data used in the EIR models was
complete and accurate. We involved EY model risk specialists
in reviewing the functionality of the models, ensuring
consistency of the calculations with the accounting policy.
We conducted sensitivity analyses on key assumptions and
judgments. Additionally, we benchmarked the inclusion of
lending fees and costs in EIR calculations, as well as the
upfront recognition of ERCs and expected future variable
interest income, comparing these to equivalent assumptions
made by peers. We extended our analysis to reflect increased
uncertainty and potential fluctuations in borrowing and switching
activity attributable to changes in the Bank of England’s base
rate. Further, we have assessed the reasonableness of the
assumption for the future propensity to redeem mortgages early
through the performance of independent stress testing.
Key observations communicated to the Audit Committee
The Group accounting policy to recognise interest income using the EIR method on loans and advances to customers is
appropriate and in compliance with the requirements of IFRS 9.
We concluded that the fees and costs being deferred are reasonable and complete; the average lives used in the EIR models
are reasonable; the extent to which ERC fees are recognised upfront is reasonable; and the data populating the EIR models is
complete and accurate. We concluded that the resulting EIR adjustments are appropriate.
112
Independent auditor’s report to the members of Virgin Money UK PLC
(continued)
Risk
Our response to the risk
Valuation of the defined benefit pension asset
Net retirement benefit asset: £357m (2023: £512m)
Please refer to note 3.3 to the financial statements
The Group has a defined benefit pension asset which
represents the fair value of pension plan assets less the
present value of defined benefit obligations.
The net defined benefit pension asset is sensitive to changes
in key judgements and estimates. Management uses
specialists to inform the valuation of the net defined benefit
pension asset.
We identified the key audit matter as the judgements and
estimates used in valuing the illiquid asset portfolio and
defined benefit obligation. Below are the key judgements and
estimates used in deriving the valuation of the net defined
benefit pension asset:
•
Assumptions: actuarial assumptions and inputs,
including discount rate, inflation and longevity which
are used to determine the valuation of the defined
benefit pension obligation; and
•
Valuations: pricing inputs and calibrations for illiquid
valuations of certain investments held by the pension
scheme.
The valuation of the defined pension benefit asset is a key
audit matter in the current period, considering the change in
ownership and the significant judgment involved in the
valuation of the unquoted assets and obligation assumptions,
including the extent of specialist involvement and level of audit
effort incurred we have determined this to be a key audit
matter.
We assessed the Group’s Pensions accounting policy and the
estimation methodology for compliance with the accounting
standards.
We gained an understanding of the key processes, controls,
assumptions and judgements used within the Group’s valuation
of certain illiquid assets held within the scheme.
We also assessed the design effectiveness of the controls in
place over the valuation of the illiquid plan assets.
For complex and illiquid investments held, we engaged our EY
valuation specialists to assess the appropriateness of
management's
valuation
methodology
including
the
judgements made in determining significant assumptions used
in the valuation of these investments.
We independently valued these illiquid and complex
investments that had been valued using unobservable market
inputs, using alternative pricing sources where available, to
evaluate management’s valuations.
We
evaluated
the
objectivity
and
competence
of
management’s specialists involved in the valuation of the
defined benefit obligation and we involved EY actuarial
specialists to evaluate the actuarial assumptions used to
calculate the defined benefit pension obligation by comparing
the assumptions to ranges we independently developed based
on market observable indices and the knowledge of the EY
actuarial specialists.
We assessed the impact on the defined pension obligation of
changes in financial, demographic and longevity assumptions
over the period, and the continued effect of the economic
outlook, including market volatility. We then assessed whether
these assumptions were supported by external evidence and
rationales.
We assessed the adequacy of the disclosures made in the
financial statements, including the appropriateness of the
assumptions and sensitivities disclosed.
Key observations communicated to the Audit Committee
We communicated our observations on management’s key assumptions and judgements. Based on the procedures performed
and the evidence obtained, we found the key actuarial assumptions used in the valuation of the defined benefit pension
obligation to be within a reasonable range and no material differences were identified during our independent valuation of the
unquoted and complex pension assets.
113
Independent auditor’s report to the members of Virgin Money UK PLC
(continued)
Risk
Our response to the risk
Transaction related matters
On 1 October 2024, Virgin Money UK Plc was acquired by
Nationwide Building Society.
We have considered where the transaction may impact financial
statement line items within the financial statements.
The key transaction related matters are:
-
Assessment of the impact on the impairment of intangible
assets on the balance sheet.
-
Assessment of the appropriateness of forecasts and
subsequent impact on the recoverability of the Deferred
Tax Asset as a result of the transaction. This included
evaluating whether these forecasts appropriately
considered the wider integration programme and potential
Part VII outcomes.
-
Accounting policy and presentational alignment as a result
of the transaction which has resulted in restatements to the
primary statements and related disclosures, including the
opening balance sheet.
This has been added as a key audit matter this year as this is
a significant event in the current period involving key
judgments which has led to increased levels of audit effort
spent on these transaction related matters.
We challenged management as to whether there were any
indicators of impairment as a result of the acquisition which
would impact the financial statements. Our challenge included
consideration as to whether intangibles would continue to
generate sufficient economic benefits until the end of their
useful economic life.
We challenged the forecasts prepared by management to
assess if any known future impacts of the transaction would
result in an impact on future forecasted profits.
We assessed the restatements made to the primary
statements and disclosures as a result of accounting policy
and presentational alignment with Nationwide. We challenged
management as to whether these were changes in estimates
or accounting policies where applicable. In addition, we
challenged the appropriateness of the changes, considering
the users of the financial statements and whether these
changes were more reliable and relevant for these users.
Key observations communicated to the Audit Committee
We communicated that the forecasts prepared by management were appropriate as at 31 March 2025.
We communicated that we concurred with management’s assessment that intangible assets were not impaired as at 31 March
2025 as a result of the acquisition.
We communicated that the restatements of the primary statements and related disclosures, including those to the opening
position were accurate and appropriately disclosed as either changes in estimates or changes in accounting policies.
114
Independent auditor’s report to the members of Virgin Money UK PLC
(continued)
Risk
Our response to the risk
Access Management
The Group is highly dependent on technology due to the
significant number of transactions that are processed daily.
IT access management controls ensure that only authorised
users have access to data. Such controls contribute to
mitigating the risk of potential fraud or errors as a result of
unauthorised access to applications and data.
The Group has implemented user access management
controls across IT applications, databases and operating
systems. The Group also has some third party hosted
systems with related business teams managing associated IT
access management controls.
The nature of the access management processes across the
Group and the associated audit procedures results is a
significant part of our IT audit work relating to access
management.
This has been added as a key audit matter this year due to
the increased proportion of audit effort for testing access
management controls.
We evaluated the design and operating effectiveness of IT
access management controls over the applications, operating
systems and databases that are relevant to financial reporting.
We tested user access by assessing the controls in place for
in-scope applications, in particular testing the user access
provisioning, de-provisioning, privileged access and periodic
recertification of users’ access.
Where control deficiencies were identified, we performed IT
substantive procedures or alternative audit procedures to
mitigate any residual risk over financial statement reporting.
Where systems are managed by third-party service providers,
we tested IT access management controls through evaluating
service organisation control (“SOC”) reports and testing
management's complementary end user controls, where
applicable. If no SOC report was available, we performed
additional procedures for example direct testing to address
financial reporting risks.
Key observations communicated to the Audit Committee
Based on our testing procedures, we are satisfied that reliance can be placed on IT access management controls impacting
financial reporting systems identified as relevant to our audit. Improvements were made around user entitlement review
execution controls. Where control exceptions were noted, we have either relied on mitigating controls or performed IT
substantive procedures to confirm that the control exceptions identified did not impact our approach to the financial statement
audit.
115
Independent auditor’s report to the members of Virgin Money UK PLC
(continued)
Our application of materiality
We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified misstatements on
the audit and in forming our audit opinion.
Materiality
The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be expected to influence
the economic decisions of the users of the financial statements. Materiality provides a basis for determining the nature and
extent of our audit procedures.
We determined materiality for the Group to be £31 million (1 October 2022 – 30 September 2023: £29 million), which is 5%
(2023: 5%) of the adjusted profit before tax of the Group of £612 million for the 18-month period 1 October 2023 to 31 March
2025 (1 October 2022 – 30 September 2023: £344 million), normalised for non-recurring items in relation to Trade Mark
Licensing Agreement, ECL harmonisation, and transaction costs. We believe removing these non-recurring charges reflects the
most useful measure for users of the financial statements.
We determined materiality for the Parent Company to be £31 million (2023: £29 million), which is 0.6% (2023: 0.7%) of equity of
the Parent Company. We believe this reflects the most useful measure for users of the financial statements as the Parent
Company's primary purpose is to act as a holding company with investments in the Group's subsidiaries, not to generate
operating profits and therefore a profit-based measure is not relevant.
During the course of our audit, we reassessed initial materiality and determined that an earnings-based measure remains
appropriate for the Group and a capital-based measure remains appropriate for the parent. For the period ended 31 March
2025, we have determined that an 18-month adjusted profit before tax number is appropriate to conduct our audit to consider
the extended period of accounts for the Group.
Performance materiality
The application of materiality at the individual account or balance level. It is set at an amount to reduce to an appropriately low
level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality.
On the basis of our risk assessments, together with our assessment of the Group’s overall control environment, our judgement
was that performance materiality was 75% (2023: 75%) of materiality, namely £23m (2023: £22m). We have set performance
materiality at this percentage due to previous experience as auditors of the Group, from which we concluded that there is a
lower expectation of material financial statement inaccuracies due to the effective control environment and nature of audit
differences resulting from our prior and current period work. Our approach is consistent with the prior period.
Reporting threshold
An amount below which identified misstatements are considered as being clearly trivial.
We agreed with the Audit Committee that we would report to them all uncorrected audit differences in excess of £1.5m (2023:
£1.4m), which is set at 5% of materiality, as well as differences below that threshold that, in our view, warranted reporting on
qualitative grounds.
We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in light
of other relevant qualitative considerations in forming our opinion.
Other information
The other information comprises the information included in the annual report, other than the financial statements and our
auditor’s report thereon. The directors are responsible for the other information contained within the annual report.
Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated
in this report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge obtained in the course of the audit or otherwise appears to be
materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to
determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we
have performed, we conclude that there is a material misstatement of the other information, we are required to report that fact.
We have nothing to report in this regard.
116
Independent auditor’s report to the members of Virgin Money UK PLC
(continued)
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
•
the information given in the strategic report and the directors’ report for the financial period for which the financial
statements are prepared is consistent with the financial statements; and
•
the strategic report and directors’ report have been prepared in accordance with applicable legal requirements
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Group and the parent company and its environment obtained in the
course of the audit, we have not identified material misstatements in the strategic report or the directors’ report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report
to you if, in our opinion:
•
adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been
received from branches not visited by us; or
•
the parent company financial statements are not in agreement with the accounting records and returns; or
•
certain disclosures of directors’ remuneration specified by law are not made; or
•
we have not received all the information and explanations we require for our audit
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on page 105, the directors are responsible for the
preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as
the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Group and parent company’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the Group or the parent company or to cease operations, or have no
realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or
in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these
financial statements.
117
Independent auditor’s report to the members of Virgin Money UK PLC
(continued)
Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect irregularities, including fraud. The risk of not detecting a material misstatement due to
fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for
example, forgery or intentional misrepresentations, or through collusion. The extent to which our procedures are capable of
detecting irregularities, including fraud is detailed below.
However, the primary responsibility for the prevention and detection of fraud rests with both those charged with governance of
the company and management.
•
We obtained an understanding of the legal and regulatory frameworks that are applicable to the Group and determined
that the most significant are the regulations, license conditions and supervisory requirement of the Prudential
Regulation Authority (PRA) and the Financial Conduct Authority (FCA).
•
We understood how the Group is complying with those frameworks by making enquiries of management, internal audit,
and those responsible for legal and compliance matters.
•
We also reviewed correspondence between the Group and UK regulatory bodies; reviewed minutes of the Board and
Executive Risk Committee; and gained an understanding of the Group’s approach to governance, demonstrated by the
Board’s approval of the Group’s governance framework and the Board’s review of the Group’s risk management
framework (RMF) and internal control processes.
•
We assessed the susceptibility of the Group’s financial statements to material misstatement, including how fraud might
occur by considering the controls that the Group has established to address risks identified by the entity, or that
otherwise seek to prevent, deter or detect fraud. We also considered performance and incentive plan targets and their
potential to influence management to manage earnings or influence the perceptions of investors and stakeholders.
•
Based on this understanding we designed our audit procedures to identify non-compliance with such laws and
regulations. Our procedures involved inquiries of internal and external legal counsel, executive management, internal
audit, and focused testing, as referred to in the Key Audit Matters section above. As part of our journal entry testing
procedures we applied specialist forensic experience and methods to the audit. We assessed the susceptibility of the
Group’s Statement to material misstatement, including how fraud might occur by considering the controls that the
Group has established to address risks identified by the entity, or that otherwise seek to prevent, deter or detect fraud.
We also considered performance and incentive plan targets and their potential to influence management to manage
earnings or influence the perceptions of investors and stakeholders.
•
The Group operates in the banking industry which is a highly regulated environment. As such the Senior Statutory
Auditor considered the experience and expertise of the engagement team to ensure that the team had the appropriate
competence and capabilities, which included the use of specialists where appropriate.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting
Council’s website at https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
119
Financial statements
Consolidated income statement
For the period ended
18 months to
31 Mar 2025
12 months to
30 Sep 2023
Note
£m
£m
Restated(1)
Interest income
7,042
3,905
Other similar interest
5
3
Interest expense and similar charges
(4,505)
(2,146)
Net interest income
2.1
2,542
1,762
Fee and commission income
2.2
288
186
Fee and commission expense
2.2
(119)
(58)
Other operating income
2.3
40
9
Losses from derivatives and hedge accounting
2.4
(4)
(14)
Total income
2,747
1,885
Operating and administrative expenses
2.5
(2,169)
(1,219)
Operating profit before impairment losses
578
666
Impairment losses on credit exposures
3.1.1.1
(429)
(309)
Profit on ordinary activities before tax
149
357
Tax expense
2.6
(39)
(122)
Profit for the period
110
235
Attributable to:
Ordinary shareholders
10
181
Other equity holders
100
54
Profit for the period
110
235
(1)
The prior year has been restated following the alignment of the Group’s accounting policies and presentation basis with Nationwide. Refer to note 1.7 for further
details.
All items dealt with in arriving at the profit before tax for each period relate to continuing activities.
The notes on pages 125 to 186 form an integral part of these financial statements.
120
Financial statements
Consolidated statement of comprehensive income
For the period ended
Note
18 months to
31 Mar 2025
12 months to
30 Sep 2023
£m
£m
Restated(1)
Profit for the period
110
235
Items that may be reclassified to the income statement
Change in cash flow hedge reserve
Losses during the period
(367)
(268)
Transfers to the income statement
(84)
(12)
Taxation thereon - deferred tax credit
125
77
(326)
(203)
Change in FVOCI reserve
4.1.5
Losses during the period
(39)
(49)
Transfers to the income statement
(1)
(1)
Taxation thereon - deferred tax credit
11
14
(29)
(36)
Change in other hedging reserve(2)
4.1.5
Losses during the period
(4)
-
Transfers to the income statement
1
-
Taxation thereon - deferred tax credit
1
-
(2)
-
Total items that may be reclassified to the income statement
(357)
(239)
Items that will not be reclassified to the income statement
Change in defined benefit pension plan
3.3
(206)
(544)
Taxation thereon - deferred tax credit
68
188
Taxation thereon - current tax credit
3
1
Total items that will not be reclassified to the income statement
(135)
(355)
Other comprehensive losses, net of tax
(492)
(594)
Total comprehensive losses for the period, net of tax
(382)
(359)
Attributable to:
Ordinary shareholders
(482)
(413)
Other equity holders
100
54
Total comprehensive losses for the period, net of tax
(382)
(359)
(1)
The prior year has been restated following the alignment of the Group’s accounting policies and presentation basis with Nationwide. Refer to note 1.7 for further
details.
(2)
The Group voluntarily adopted IFRS 9 ‘Financial Instruments’ – Hedge Accounting from 1 October 2024 on a prospective basis which required the creation of a
new ‘other hedging reserve’. Further information is included in note 1.6. Comparatives have not been restated.
The notes on pages 125 to 186 form an integral part of these financial statements.
121
Financial statements
Consolidated balance sheet
(1)
The prior year has been restated following the alignment of the Group’s accounting policies and presentation basis with Nationwide. Refer to note 1.7 for further
details.
The notes on pages 125 to 186 form an integral part of these financial statements.
These financial statements were approved by the Board of Directors on 29 May 2025 and were signed on its behalf by:
Chris Rhodes
Gergely Zaborszky
Chief Executive Officer
Chief Financial Officer
Company name: Virgin Money UK PLC, Company number: 09595911
As at
Note
31 Mar 2025
30 Sep 2023
£m
£m
Restated(1)
Assets
Financial instruments
3.1
At amortised cost
3.1.1
Loans and advances to customers
3.1.1.1
71,072
72,245
Fair value adjustment for portfolio hedged risk
(116)
(492)
Cash and balances with central banks
3.1.1.2
10,882
11,282
Due from other banks and similar institutions
371
681
At FVOCI
3.1.2
6,197
6,184
At FVTPL
3.1.3
Loans and advances to customers
47
59
Derivatives
3.1.3.1
48
135
Other
2
2
Intangible assets and goodwill
3.2
127
173
Property, plant and equipment
180
214
Accrued income and prepaid expenses
100
59
Deferred tax
2.6
318
286
Current tax assets
131
21
Defined benefit pension assets
3.3
357
512
Other assets
3.4
81
70
Total assets
89,797
91,431
Liabilities
Financial instruments
3.1
At amortised cost
3.1.1
Customer deposits
3.1.1.3
70,383
66,827
Debt securities in issue
3.1.1.4
9,921
9,719
Due to other banks and similar institutions
3.1.1.5
956
7,069
At FVTPL
3.1.3
Derivatives
3.1.3.1
132
290
Deferred tax
2.6
89
179
Due to related entities
5.3
755
-
Provisions for liabilities and charges
3.7
39
69
Accruals and deferred income
306
67
Other liabilities
3.5
1,665
1,959
Total liabilities
84,246
86,179
Equity
Share capital and share premium
4.1.1
941
143
Other equity instruments
4.1.2
693
594
Capital reorganisation reserve
4.1.3
(839)
(839)
Merger reserve
4.1.4
2,128
2,128
Other reserves
4.1.5
167
528
Retained earnings
2,461
2,698
Total equity
5,551
5,252
Total liabilities and equity
89,797
91,431
122
Financial statements
Consolidated statement of changes in equity
Other reserves
Share
capital
and
share
premium
Other
equity
instruments
Capital
reorg’
reserve
Merger
reserve
Own
shares
held
Capital
redemption
reserve
Deferred
shares
reserve
Equity
based
comp’
reserve
FVOCI
reserve
Other
hedging
reserve(1)
Cash
flow
hedge
reserve
Retained
earnings
Total
equity
Note
4.1.1
4.1.2
4.1.3
4.1.4
4.1.5
4.1.5
4.1.5
4.1.5
4.1.5
4.1.5
4.1.5
Restated(2) Restated(2)
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
As at 1 October 2022 (as
reported)
148
666
(839)
2,128
-
3
11
10
43
-
699
3,471
6,340
Restatements(2)
-
-
-
-
-
-
-
-
-
-
-
(344)
(344)
As at 1 October 2022
(restated)
148
666
(839)
2,128
-
3
11
10
43
-
699
3,127
5,996
Profit for the year
(restated)(2)
-
-
-
-
-
-
-
-
-
-
-
235
235
Other comprehensive losses
net of tax
-
-
-
-
-
-
-
-
(36)
-
(203)
(355)
(594)
Total comprehensive losses
for the period
-
-
-
-
-
-
-
-
(36)
-
(203)
(120)
(359)
AT1 distributions paid
-
-
-
-
-
-
-
-
-
-
-
(54)
(54)
Dividends paid to ordinary
shareholders
-
-
-
-
-
-
-
-
-
-
-
(148)
(148)
Ordinary shares issued
2
-
-
-
-
-
-
-
-
-
-
-
2
Share buyback
(7)
-
-
-
-
7
-
-
-
-
-
(112)
(112)
Purchase of own shares
-
-
-
-
(2)
-
-
-
-
-
-
-
(2)
Transfer from equity based
compensation reserve
-
-
-
-
-
-
-
(4)
-
-
-
4
-
Equity based compensation
expensed
-
-
-
-
-
-
-
5
-
-
-
-
5
Settlement of Virgin Money
Holdings (UK) PLC share
awards
-
-
-
-
-
-
(5)
-
-
-
-
1
(4)
AT1 redemption
-
(72)
-
-
-
-
-
-
-
-
-
-
(72)
As at 30 September 2023(2)
143
594
(839)
2,128
(2)
10
6
11
7
-
496
2,698
5,252
Profit for the period
-
-
-
-
-
-
-
-
-
-
-
110
110
Other comprehensive losses
net of tax
-
-
-
-
-
-
-
-
(29)
(2)
(326)
(135)
(492)
Total comprehensive
(losses)/income for the
period
-
-
-
-
-
-
-
-
(29)
(2)
(326)
(25)
(382)
AT1 distributions paid
-
-
-
-
-
-
-
-
-
-
-
(100)
(100)
Dividends paid to ordinary
shareholders
-
-
-
-
-
-
-
-
-
-
-
(52)
(52)
Ordinary shares issued
803
-
-
-
-
-
-
-
-
-
-
-
803
Share buyback
(5)
-
-
-
-
5
-
-
-
-
-
(63)
(63)
Purchase of own shares
-
-
-
-
(11)
-
-
-
-
-
-
-
(11)
Transfer from equity based
compensation reserve
-
-
-
-
-
-
-
(10)
-
-
-
10
-
Equity based compensation
expensed
-
-
-
-
-
-
-
7
-
-
-
-
7
Settlement of Virgin Money
Holdings (UK) PLC share
awards
-
-
-
-
8
-
(5)
-
-
-
-
(5)
(2)
Sale of own shares to
Nationwide on acquisition
-
-
-
-
5
-
-
-
-
-
-
2
7
Acceleration of equity based
compensation expense on
court sanction date
-
-
-
-
-
-
-
4
-
-
-
-
4
Impact of share schemes
moving from equity settled to
cash settled on court
sanction date
-
-
-
-
-
-
(1)
(6)
-
-
-
(1)
(8)
AT1 issuance
-
346
-
-
-
-
-
-
-
-
-
-
346
AT1 redemption
-
(247)
-
-
-
-
-
-
-
-
-
(3)
(250)
As at 31 March 2025
941
693
(839)
2,128
-
15
-
6
(22)
(2)
170
2,461
5,551
(1)
The Group voluntarily adopted IFRS 9 ‘Financial Instruments’ – Hedge Accounting from 1 October 2024 on a prospective basis which required the creation of a new
‘other hedging reserve’. Further information is included in note 1.6. Comparatives have not been restated.
(2)
The prior year has been restated following the alignment of the Group’s accounting policies and presentation basis with Nationwide. Refer to note 1.7 for further
details.
The notes on pages 125 to 186 form an integral part of these financial statements.
123
Financial statements
Consolidated statement of cash flows
For the period ended
18 months to
12 months to
31 Mar 2025
30 Sep 2023
Note
£m
£m
Restated(1)
Operating activities
Profit on ordinary activities before tax
149
357
Adjustments for:
Non-cash or non-operating items included in profit before tax
5.4
412
477
Changes in operating assets and liabilities
5.4
(1,624)
(557)
Tax paid
(38)
(48)
Net cash provided by operating activities
(1,101)
229
Cash flows from investing activities
Proceeds from sale and maturity of FVOCI investments
2,266
1,868
Purchase of FVOCI investments
(2,198)
(2,950)
Proceeds from sale of property, plant and equipment
3
1
Purchase of property, plant and equipment
(15)
(9)
Purchase and development of intangible assets
(6)
(11)
Acquisition of controlled entities
(20)
-
Net cash provided by/(used in) investing activities
30
(1,101)
Cash flows from financing activities
Interest paid on financing liabilities
(242)
(129)
Repayment of principal portions of lease liabilities
3.6
(40)
(24)
Redemption and principal repayment on financing liabilities
5.3
(998)
(432)
Issuance of AT1 securities
4.1.2
347
-
Redemption of AT1 securities
4.1.2
(250)
(72)
Issuance of financing liabilities
5.3
641
747
Share buybacks and purchase of own shares
(76)
(112)
Proceeds from ordinary shares issued
800
-
Ordinary dividends paid
4.1.1
(52)
(148)
AT1 distributions
4.1.2
(100)
(54)
Net increase in amounts due to related entities
750
-
Net cash provided by/(used in) financing activities
780
(224)
Net decrease in cash and cash equivalents
(291)
(1,096)
Cash and cash equivalents at the beginning of the period
10,595
11,691
Cash and cash equivalents at the end of the period
5.4
10,304
10,595
(1)
The prior year has been restated following the alignment of the Group’s accounting policies and presentation basis with Nationwide. Refer to note 1.7 for further
details.
The notes on pages 125 to 186 form an integral part of these financial statements.
Total interest received was £7,279m (12 months to 30 September 2023: £3,532m) and total interest paid was £4,366m
(12 months to 30 September 2023: £1,915m).
124
Financial statements
Consolidated statement of cash flows (continued)
Movements in liabilities arising from financing activities
Group
Debt
securities
in issue
Lease
liabilities
Intercompany
loans
payable
Total
Note
3.1.1.4
3.6
£m
£m
£m
£m
Restated(1)
Restated(1)
At 1 October 2022
3,162
132
-
3,294
Cash flows:
Issuances
747
-
-
747
Redemptions
(432)
-
-
(432)
Repayment
-
(24)
-
(24)
Tax paid
-
(1)
-
(1)
Non-cash flows:
Fair value and other associated adjustments
74
-
-
74
Additions to right-of-use asset in exchange for increased
lease liabilities
-
76
-
76
Remeasurement
-
(6)
-
(6)
Movement in accrued interest
15
3
-
18
Unamortised costs
(2)
-
-
(2)
At 30 September 2023
3,564
180
-
3,744
Cash flows:
Issuances
641
-
750
1,391
Redemptions
(998)
-
-
(998)
Repayment
-
(40)
-
(40)
Non-cash flows:
Fair value and other associated adjustments
163
-
-
163
Additions to right-of-use asset in exchange for increased
lease liabilities
-
2
-
2
Remeasurement/disposal
-
11
-
11
Movement in accrued interest
(10)
7
-
(3)
Unamortised costs
4
-
-
4
At 31 March 2025
3,364
160
750
4,274
(1)
The prior year has been restated following the alignment of the Group’s accounting policies and presentation basis with Nationwide. Refer to note 1.7 for further
details.
The notes on pages 125 to 186 form an integral part of these financial statements.
125
Notes to the consolidated financial statements
Section 1: Basis of preparation
1.1 General information
The Company is incorporated in the United Kingdom under the Companies Act and registered in England and Wales. The
consolidated financial statements comprise those of the Company and its controlled entities, together the ‘Group’. Following the
acquisition of the Group by Nationwide on 1 October 2024, the Company’s accounting reference date was changed from 30
September to 31 March in order to align to Nationwide’s accounting reference date. The financial statements have therefore
been prepared for the 18-month period ended 31 March 2025 meaning the amounts presented are not entirely comparable with
those of the prior period.
Following the acquisition, the Company is now a wholly owned subsidiary of Nationwide Building Society. Nationwide, the
Company’s immediate and ultimate parent and controlling party, is a building society incorporated and registered in England
and Wales. The post-acquisition results of the Group are included in the consolidated financial statements of Nationwide
Building Society, which is the parent undertaking of the smallest and largest group to consolidate these results.
Nationwide Building Society is registered at Nationwide House, Pipers Way, Swindon, SN38 1NW. Nationwide’s consolidated
annual report and accounts can be obtained from this address or at nationwide.co.uk.
1.2 Basis of accounting
The consolidated financial statements, which should be read in conjunction with the Strategic report and the Directors’ report,
have been prepared in accordance with UK adopted IASs.
The financial information has been prepared under the historical cost convention, as modified by the revaluation of certain
financial assets and liabilities at fair value through profit or loss and other comprehensive income. Fair value is defined in note
3.1.4.
1.3 Going concern
The Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for at
least the next 12 months from the date the Annual Report and Accounts are authorised for issue, and that the Group is well
placed to manage its business risks successfully. Accordingly, they continue to adopt the going concern basis in preparing
these financial statements. In reaching this assessment, the Directors have considered a wide range of information relating to
present and future conditions, including future projections of profitability, cash flows, capital requirements and capital resources.
These considerations include potential impacts from principal and emerging risks, stress scenarios, and the related impact on
profitability, capital and liquidity.
On 1 October 2024 the Company was acquired by Nationwide. The Directors’ going concern assessment has focussed on the
current Board approved strategy, with consideration of integration related risks and the monitoring and mitigation activities
around them. Following completion, Nationwide is working with the Group’s management to undertake a detailed review of the
Group which will include, among other considerations, an appraisal of the short and long-term objectives, strategy, and potential
of the Group within the Nationwide group structure. The Group is preparing to transfer the assets and liabilities of Clydesdale
Bank PLC into Nationwide, which we expect to complete in 2026/27, through a proposed banking business transfer under Part
VII of the Financial Services and Markets Act 2000. This will be subject to legal and regulatory approval, and completion of
internal governance processes, and is part of the wider integration programme that we expect to take several years to fully
complete. The Directors’ going concern conclusion considers available information regarding potential Part VII outcomes. The
Directors anticipate that Nationwide will manage any consequential changes to Group capital, funding sources and strategy in a
controlled manner which ensures the Group continues to meet all regulatory capital and funding requirements and can continue
to operate as a going concern for at least the next 12 months from the date the Annual Report and Accounts are authorised for
issue.
Overview
This section sets out the Group’s accounting policies that relate to the consolidated financial statements as a whole. Where an
accounting policy is specific to one note, the policy is described in the note to which it relates. This section also highlights newly
adopted accounting standards, amendments and interpretations which are relevant to the Group. Where relevant, we explain
how these changes are expected to impact the financial position and performance of the Group.
The Group has adopted the UK Finance Code for Financial Reporting Disclosure and has prepared the 2025 Annual Report
and Accounts in compliance with the Code.
126
Notes to the consolidated financial statements (continued)
Section 1: Basis of preparation (continued)
1.4 Basis of consolidation
Controlled entities are all entities (including structured entities) to which the Company is exposed, or has rights, to variable
returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. An
assessment of control is performed if there are indicators that control may have changed.
Controlled entities are consolidated from the date on which control is established by the Group until the date that control
ceases. The acquisition method of accounting is used to account for business combinations other than those under common
control. A non-controlling interest is recognised by the Group in respect of any portion of the total assets less total liabilities of
an acquired entity or entities that is not owned by the Group. Balances and transactions between entities within the Group and
any unrealised gains and losses arising from those transactions are eliminated in full upon consolidation.
The consolidated financial statements have been prepared using uniform accounting policies.
1.5 Critical accounting estimates and judgements
The preparation of financial statements requires the use of certain critical accounting estimates and judgements that affect the
reported amounts of assets, liabilities, revenues and expenses and the disclosed amount of contingent liabilities. Actual results
may differ from those on which management’s estimates are based. Estimates and assumptions are continually evaluated and
are based on historical experience and other factors, including expectations of future events that are believed to be reasonable.
The Group considers the most significant use of accounting estimates and judgements relate to the following areas:
Area
Estimates
Judgements
Further detail
Impairment provisions on
credit exposures
Asset lifetimes
Economic scenarios
SICR
Definition of default
PMAs
Credit risk section of
Risk report and note
3.1.1.1
Deferred tax
Period for the recoverability of deferred
tax assets
Note 2.6
Retirement benefit obligations
Discount rate
Inflation assumptions
Mortality assumptions
Note 3.3
The only change to the Group’s critical accounting estimates and judgements compared to those stated in the Group’s 2023
Annual Report and Accounts relates to EIR. Following the acquisition by Nationwide, the Group’s accounting policy on EIR
accounting changed to align with that of Nationwide which resulted in a substantial reduction in the EIR adjustment (refer to
notes 1.7 and 2.1). As a result, management no longer consider EIR as requiring critical accounting estimates or judgements.
Critical accounting estimates and judgements related to climate-related risks
In addition, management has also considered and reflected on the potential impact of climate-related risks on the Group’s
financial position and performance.
This involved undertaking an assessment over the Group’s assets (both financial and non-financial) and evaluating whether the
observable effects of physical and transition risk of climate change would have a material impact on the Group’s financial
position and performance in the current period. It is widely accepted that the effects of climate change in the UK will not be
significant in the short term and that the inherent risks and uncertainties in quantifying the effect of climate change in the
financial statements are considerable and more likely to impact in the medium to longer term.
The Group’s customer lending is the most significant financial asset class exposed to the potential impact of climate-related
risks, primarily through ECL implications, the ability of the customer to meet their contractual payments and the potential for a
fall in collateral values. Given the challenges associated with modelling specific climate projections, the Group’s IFRS 9
scenarios do not make explicit and objective assumptions about climate change impacts for which the associated probability
can be derived within the existing methodology. Instead, the Group’s base forecast, and therefore the scenarios, incorporate the
short to medium-term (five-year horizon) impact of the domestic and global economy on demand for fossil fuel and thus
emissions. Consequently we consider that as a UK-based bank with no significant lending outside of the UK, the potential for
material ECLs to emerge as a result of climate change in the short term is negligible.
127
Notes to the consolidated financial statements (continued)
Section 1: Basis of preparation (continued)
1.5 Critical accounting estimates and judgements (continued)
Other non-financial assets that may be impacted include the Group’s deferred tax asset and the pension assets held by the
Group’s defined benefit pension scheme. The Group assesses the recoverability of deferred tax assets over a six-year
corporate planning time horizon which incorporates all aspects of the Group’s future performance and expectations. The
Trustee of the defined benefit pension scheme is responsible for all investment decisions, and these are made in accordance
with a SIP which incorporates climate change considerations. In addition, by necessity, the investment decisions made by the
Trustees are normally medium to long term in nature to match the related pension obligations. The majority of the scheme
assets held at 31 March 2025 are in lower risk government and corporate bonds, with the remaining investments in secure
income alternatives, property and renewables. As its funding position has improved it has disinvested from some of the asset
classes that were more exposed to climate risks (such as public equity), but the Scheme is increasingly holding a larger
proportion of longer dated assets to better match its liabilities. The Trustee is therefore very focused on the sustainability of
these assets.
Overall, while the effects of climate change represent a source of significant uncertainty, the Group does not consider there to
be a material impact on its estimates and judgements from physical and transition risks of climate change in these financial
statements.
1.6 New accounting standards and interpretations
The Group adopted the following International Accounting Standards Board (IASB) pronouncements in the current financial
period, which have been endorsed for use in the UK by the UK Endorsement Board (UKEB) and are not considered to have a
material impact for the Group:
•
Amendments to IAS 8 ‘Accounting Policies and Accounting Estimates’: This was issued in February 2021 (applicable for
accounting periods beginning on or after 1 January 2023) and received endorsement for use in the UK in November
2022. The amendments clarify what changes in accounting estimates are and how these differ from changes in
accounting policies and corrections of errors.
•
Amendments to IAS 12 ‘Income Tax’: Deferred Tax Related to Assets and Liabilities Arising from a Single Transaction.
This was issued in May 2021 (applicable for accounting periods beginning on or after 1 January 2023) and received
endorsement for use in the UK in November 2022. The amendments provide a further exception from the initial
recognition exemption. Under the amendments, an entity does not apply the initial recognition exemption for transactions
that give rise to equal taxable and deductible temporary differences.
•
International tax reform - Pillar Two model rules: Amendments to IAS 12. This was issued in May 2023 (additional
disclosure requirements are applicable for accounting periods beginning on or after 1 January 2023, although some
paragraphs were for immediate application) and received endorsement for use in the UK in July 2023. The amendments
introduce a mandatory temporary exception to the accounting for deferred taxes arising from the implementation of the
OECD Pillar Two model rules, together with targeted disclosure requirements for affected entities. As mandated, the
Group applied the temporary exemption on adoption and has neither recognised nor disclosed information about
deferred tax assets and liabilities related to Pillar Two income taxes.
Amendments to IAS 1 ‘Presentation of Financial Statements’ and IFRS Practice Statement 2 ‘Making Materiality Judgements’
which were issued in February 2021 (applicable for accounting periods beginning on or after 1 January 2023) and endorsed for
use in the UK by the UK Endorsement Board in November 2022 was early adopted by the Group with effect from 1 October
2022.
As a result of the acquisition by Nationwide, the following pronouncements that were applicable for accounting periods
beginning on or after 1 January 2024 have been early adopted in these financial statements. Their early adoption has not had a
material impact for the Group:
•
Amendments to IAS 1 ‘Presentation of Financial Statements’: Classification of Liabilities as Current or Non-current and
Non-current Liabilities with Covenants. These were issued in January 2020 and October 2022 respectively and both
received endorsement for use in the UK in July 2023. The amendments clarify the criteria for the classification of a
liability as either current or non-current, with additional considerations and disclosures required for loan arrangements
that are subject to covenants.
•
Amendments to IFRS 16 ‘Leases’: Lease Liability in a Sale and Leaseback. This was issued in September 2022 and
received endorsement for use in the UK in May 2023. The amendments require a seller/lessee to subsequently measure
lease liabilities arising from a sale and leaseback transaction in a way that does not result in the recognition of a gain or
loss relating to the right of use it retains.
•
Amendments to IAS 7 ‘Statement of Cash Flows’ and IFRS 7 Financial Instruments: Disclosures’: Supplier Finance
Arrangements. This was issued in May 2023 and received endorsement for use in the UK in November 2023. The
amendments require qualitative and quantitative information to be disclosed about any supplier finance arrangements.
128
Notes to the consolidated financial statements (continued)
Section 1: Basis of preparation (continued)
1.6 New accounting standards and interpretations (continued)
The transition requirements of IFRS 9 ‘Financial Instruments’ include an option to continue to apply the existing hedge
accounting requirements of IAS 39 until the development of a separate standard on accounting for dynamic risk management
(macro hedge accounting). For the period from 1 October 2023 to 30 September 2024, the Group continued to apply IAS 39 for
hedge accounting. Following the acquisition by Nationwide from 1 October 2024, the Group voluntarily adopted the hedge
accounting provisions of IFRS 9 on a prospective basis and continues to apply IAS 39 fair value hedge accounting for fair value
macro hedges (fair value hedges of the interest rate exposure of a portfolio of financial assets or financial liabilities).
The changes resulting from adoption of the hedge accounting provisions of IFRS 9, which are applicable to the Group, include:
•
The ability to choose to exclude currency basis spreads from hedge designation and instead report this element of fair
valuation directly in a hedge reserve within equity.
•
The performance of hedge effectiveness testing on a prospective basis only, in line with risk management strategy.
•
The inability to voluntarily de-designate hedging relationships, unless there has been a change to risk management
objectives.
Adoption, which did not have a significant impact for the Group, has resulted in the creation of an ‘other hedging reserve’ within
equity to include the impact of foreign currency basis spreads. The value of this reserve at 31 March 2025 was a cumulative
loss of £2m. Comparatives have not been restated.
The IASB has issued a number of new and amended IFRSs in the period that are not mandatory for the current reporting period
and have not been early adopted by the Group. The majority of these are not expected to have a material impact on the Group.
IFRS 18 ‘Primary Financial Statements – General Presentation and Disclosures’ was issued on 9 April 2024 and is effective for
reporting periods beginning on or after 1 January 2027 (subject to UK endorsement). The new Standard will replace IAS 1
‘Presentation of Financial Statements’ and while much of IAS 1 has been retained in IFRS 18, there are a number of new
requirements whose aim is to help entities improve how they communicate their financial performance to investors. These
include i) the presentation of new defined subtotals in the income statement; ii) the disclosure of management-defined
performance measures; and iii) enhanced requirements for grouping (aggregation and disaggregation) of information. Whilst the
changes are a few years away from becoming mandatory, the Group is currently analysing the full potential impacts of the new
Standard and expects IFRS 18 to alter the way certain information is presented but not to have a material effect on the values
that are ultimately reported.
1.7
Changes to accounting policies and presentation as a result of the acquisition by
Nationwide
Following the acquisition of the Company by Nationwide on 1 October 2024, the Group has made a number of changes to
accounting policies and presentation to align with the new Nationwide reporting structure. These changes have been made to
enhance comparability and consistency with Nationwide, therefore providing more relevant and reliable information to users of
the financial statements. In-line with IAS 8 ‘Accounting Policies, Changes in Accounting Estimates and Errors’ the changes have
been applied retrospectively.
Changes in accounting policy: these are material changes to the Group’s accounting policies that were required to align with the
new Nationwide published accounting policies. Prior reporting periods have been restated with a cumulative change in the
retained earnings position at 1 October 2023 of £355m.
Changes in presentation: these are changes to the presentation of certain items within the income statement, balance sheet
and the statement of cash flows that were required to align with the preferred presentation of the new Nationwide Group. These
changes in presentation have been classified as either ‘reallocations’ where the change is contained entirely within the table
and therefore has no impact on the total disclosed or as ‘Nationwide alignment’ where the change does have an impact on the
total with further explanatory detail provided. The prior year presentation has been amended to conform with the current period
presentation with no overall financial impact or change to the retained earnings position at 1 October 2023.
129
Notes to the consolidated financial statements (continued)
Section 1: Basis of preparation (continued)
1.7
Changes to accounting policies and presentation as a result of the acquisition by
Nationwide (continued)
The following table summarises the most significant of these changes(1).
Changes in accounting policy:
Area
What has changed
Impact on
30 Sep 2023
retained earnings
(Dr)/Cr
£m
Prior
period
restated
Mortgage EIR
accounting
Removal of SVR interest cash flows at the end of the initial
product term (more information on this can be found in note 1.5
and 2.1)
(179)
Yes
Credit card EIR
accounting
Revised unit of account methodology from the full contract with
the customer to each individual card transaction (more
information on this can be found in note 1.5 and 2.1)
(259)
Yes
Hedge accounting
Voluntary adoption of the IFRS 9 hedge accounting
requirements on a prospective basis (more information on this
can be found in note 1.6)
-
No
Investment property
and branches and non-
specialised admin
buildings
The valuation basis has changed from depreciated cost less
impairment to fair value
(10)
Yes
Deferred tax
The losses recognised from the accounting policy changes is
deductible for corporation tax, but the tax deduction is spread
equally over ten years. This temporary timing difference results
in the creation of a deferred tax asset.
93
Yes
(355)
(1)
Changes relating to the ECL calculation as a consequence of the acquisition by Nationwide are classed as changes in accounting estimates and are not listed
in this note. Please refer to page 19 of the credit risk section of the Risk report.
The overall impact on the retained earnings position at 30 September 2023 is as follows:
Retained earnings
impact at 1 Oct 2022
(Dr)/Cr
Retained earnings
impact in year to
30 Sep 2023
(Dr)/Cr
Total retained
earnings impact
(Dr)/Cr
£m
£m
£m
Retained earnings as reported at 30 Sep 2023
3,053
Mortgage EIR adjustment(1)
(171)
(8)
(179)
Credit card EIR adjustment(2)
(285)
26
(259)
Properties adjustment(3)
(4)
(6)
(10)
Deferred tax
116
(23)
93
Total adjustments
(344)
(11)
(355)
Restated retained earnings at 30 Sep 2023
2,698
(1)
Adjusted against interest income.
(2)
This has been adjusted against interest income (£285m debit for the period to 1 October 2022 and £28m credit for the year to 30 September 2023), and
operating expenses (£2m debit for the year to 30 September 2023).
(3)
With the move to a fair value basis from depreciated cost less impairment, fair value movements are reflected through other operating income.
130
Notes to the consolidated financial statements (continued)
Section 1: Basis of preparation (continued)
1.7
Changes to accounting policies and presentation as a result of the acquisition by
Nationwide (continued)
Further detail on the impact of these and other adjustments to the income statement and balance sheet for 30 September 2023
are provided below, with the following table highlighting the impact of the accounting policy changes on the relevant balance
sheet line items as at 30 September 2022:
Original balance reported
as at 30 Sep 2022
Impact of accounting
policy changes
Restated balance as at
30 Sep 2022
£m
£m
£m
Loans and advances to customers
71,751
(456)(1)
71,295
Property, plant and equipment
211
(4)
207
Deferred tax assets
146
116
262
Total assets
91,907
(344)
91,563
Retained earnings
(3,471)
344
(3,127)
Total equity
(6,340)
344
(5,996)
Total liabilities and equity
(91,907)
344
(91,563)
(1)
This combines the mortgage EIR (£171m) and credit card EIR (£285m) adjustments.
Changes in accounting presentation (none of which impact on retained earnings at 1 October 2023):
These changes impact (i) the income statement; (ii) the balance sheet; and (iii) the statement of cash flows.
(i) Income statement
What has changed
Prior period
restated
Original presentation
Revised presentation
Fair value gains/losses on designated FVTPL
equity to be recognised within other operating
income instead of gains less losses on financial
instruments at fair value.
Yes
Gains less losses on
financial instruments at fair
value
Other operating income
Gains/losses on derivative and hedging
transactions to be presented as a separate line
item (gains/losses from derivative and hedge
accounting) instead of gains less losses on
financial instruments at fair value.
Yes
Gains less losses on
financial instruments at fair
value
New income statement
line item
The line item composition of the operating and
administrative expenses note to the financial
statements.
Yes
Group allocated line items in
the note to the financial
statements
Nationwide allocated
line items in the note to
the financial statements
Fee and commission income and expenses to be
presented separately on the face of the income
statement instead of within other operating income
Yes
Other operating income
New income statement
line items
Interest on net defined benefit pension surplus to
be recognised within interest income instead of
operating expenses
Yes
Operating expenses (staff
costs)
Interest income
Restatement of property related depreciation and
impairments as a result of the move back to a fair
value measurement basis for property assets
Yes
Operating expenses
(depreciation/amortisation)
Other operating income
131
Notes to the consolidated financial statements (continued)
Section 1: Basis of preparation (continued)
1.7
Changes to accounting policies and presentation as a result of the acquisition by
Nationwide (continued)
The impact of these on the 30 September 2023 income statement is as follows(1):
Original
value
£m
Fee and
commission
£m
Defined
benefit
pension
credit
£m
FV gains/losses
designated
FVTPL equity
£m
Gains/losses on
derivative and
hedging
transactions
£m
Property related
depreciation
and
amortisation
£m
Accounting
policy
adjustments
(as above)
£m
Restated
value
£m
Interest income
3,830
-
55
-
-
-
20
3,905
Gains less losses on
financial instruments
at fair value
(12)
-
-
(2)
14
-
-
-
Fee and
commission
income(2)
-
186
-
-
-
-
-
186
Fee and
commission
expense(2)
-
(58)
-
-
-
-
-
(58)
Other operating
income
152
(128)
-
2
-
(11)
(6)
9
Losses from
derivatives and
hedge accounting(2)
-
-
-
-
(14)
-
-
(14)
Operating and
administrative
expenses
(1,173)
-
(55)
-
-
11
(2)
(1,219)
Profit before tax
345
-
-
-
-
-
12
357
Taxation
(99)
-
-
-
-
-
(23)
(122)
Profit after tax
246
-
-
-
-
-
(11)
235
(1)
The table only highlights those income statement line items that have been restated and does not include those income statement line items which have not
changed from those originally reported at 30 September 2023. In the relevant note to the financial statements, only the restated position will be presented, with
a footnote directing the user to this note for the detailed changes.
(2)
New line item.
The impact of these on selected 30 September 2023 income statement notes is as follows:
Other operating income (note 2.3)
As originally presented
Restated
£m
£m
Net fee and commission income
128
-
Margin on foreign exchange derivative brokerage
19
19
Gains on sale of financial assets at FVOCI
1
1
Fair value gains on designated FVTPL equity
-
2
Gains/(losses) on properties held at fair value
-
(17)
Other income
4
4
152
9
Operating and administrative expenses (note 2.5)
As originally
presented
Reallocations
Accounting policy
and presentation
changes
(as above)
Restated
£m
£m
£m
£m
Staff costs
432
3
55
490
Property and infrastructure(1)
74
-
-
74
Technology and communications(2)
130
86
-
216
Corporate and professional services
240
(240)
-
-
Depreciation, amortisation and impairment
116
-
(11)
105
Customer redress, legal and regulatory provisions
-
1
-
1
Bank levy
-
2
-
2
Other expenses(3)
181
148
2
331
Total
1,173
-
46
1,219
(1)
Renamed to property costs.
(2)
Renamed to technology costs.
(3)
Renamed to other operating costs.
132
Notes to the consolidated financial statements (continued)
Section 1: Basis of preparation (continued)
1.7
Changes to accounting policies and presentation as a result of the acquisition by
Nationwide (continued)
In addition to the accounting policy adjustments, other reclassifications were made to align with the preferred presentation of the
new Nationwide reporting structure: (i) the reclassification of corporate and professional services to other expenses (£240m); (ii)
the reallocation of MSA related costs from other expenses to technology and communications (£86m); (iii) a reclassification of
£3m of staff allowances from other expenses to staff costs; and (iv) a reclassification of £3m from other expenses to new line
items - customer redress, legal and regulatory provisions (£2m) and bank levy (£1m).
While the staff costs figure was increased by £58m from £432m to £490m, there were also reallocations between a number of
different line items, with the 30 September 2023 impact as follows:
As originally
presented
Reallocations
Accounting policy
and presentation
changes
(as above)
Restated
£m
£m
£m
£m
Wages and salaries
275
22
-
297
Social security costs
32
6
-
38
Defined contribution expense(1)
56
5
-
61
Defined benefit pension credit
(50)
(5)
55
-
Equity based compensation
6
(6)
-
-
Bonus awards(2)
22
3
-
25
Redundancy and restructuring
7
(7)
-
-
Temporary staff costs
24
(24)
-
-
Other staff costs
60
9
-
69
Total
432
3
55
490
(1)
Renamed to pension costs.
(2)
Renamed to bonuses.
These reallocations included (i) reclassifying overtime costs from other staff costs to wages and salaries (£22m); (ii) combining
all social security related costs to the same line item (£6m); (iii) reclassifying temporary staff costs (£24m) and redundancy and
restructuring costs (£7m) to other staff costs (£31m); (iv) combining all pension related costs to the same line item (£5m); (v)
combining performance related costs to the one line item; and (vi) reclassifying staff allowances out of other expenses into other
staff costs (£3m).
133
Notes to the consolidated financial statements (continued)
Section 1: Basis of preparation (continued)
1.7
Changes to accounting policies and presentation as a result of the acquisition by
Nationwide (continued)
(ii) Balance sheet
What has changed
Prior period
restated
Original presentation
Revised presentation
London Clearing House (LCH) collateral treatment
to be recognised within due to/from other banks
and similar institutions instead of other
assets/liabilities.
Yes
Other assets/liabilities
Due to/from other banks
and similar institutions
Macro hedge adjustments to be presented as a
separate line item instead of within loans and
advances to customers.
Yes
Loans and advances to
customers
New balance sheet line
item
Property, plant and equipment to be presented as
a separate line item instead of within other assets.
Yes
Other assets
New balance sheet line
item
Prepayments and accrued income to be presented
as a separate line item instead of within other
assets.
Yes
Other assets
New balance sheet line
item
Accruals and deferred income to be presented as
a separate line item instead of within other
liabilities.
Yes
Other liabilities
New balance sheet line
item
Current tax assets to be presented as a separate
line item instead of within other assets.
Yes
Other assets
New balance sheet line
item
The balance for investment properties to be
presented within property, plant and equipment
instead of other assets.
Yes
Other assets
Property, plant and
equipment
The impact of these on the 30 September 2023 balance sheet is as follows(1):
Original
value
£m
LCH
collateral
£m
Macro hedge
adjustments
£m
Other asset
changes
£m
Other liabilities
changes
£m
Accounting
policy changes
£m
Restated
value
£m
Assets
Loans and advances to customers
72,191
-
492
-
-
(438)(3)
72,245
Due from other banks and similar
institutions
667
14
-
-
-
-
681
Property, plant and equipment(2)
-
-
-
224(4)
-
(10)
214
Accrued income and prepaid
expenses(2)
-
-
-
59
-
-
59
Fair value adjustment for portfolio
hedged risk(2)
-
-
(492)
-
-
-
(492)
Current tax assets(2)
-
-
-
21
-
-
21
Deferred tax assets
193
-
-
-
-
93
286
Other assets
388
(14)
-
(304)
-
-
70
Liabilities
Due to other banks and similar
institutions
(6,939)
(130)
-
-
-
-
(7,069)
Accruals and deferred income(2)
-
-
-
-
(67)
-
(67)
Other liabilities
(2,156)
130
-
-
67
-
(1,959)
Retained earnings
(3,053)
-
-
-
-
355
(2,698)
(1)
The table only highlights those balance sheet line items that have been restated and does not include those balance sheet line items which have not changed
from those originally reported at 30 September 2023. In the relevant note to the financial statements, only the restated position will be presented, with a
footnote directing the user to this note for the detailed changes.
(2)
New line item.
(3)
This combines the mortgage EIR (£179m) and credit card EIR (£259m) prior year adjustments.
(4)
This combines the property, plant and equipment (£184m) and investment property (£40m) balances.
134
Notes to the consolidated financial statements (continued)
Section 1: Basis of preparation (continued)
1.7
Changes to accounting policies and presentation as a result of the acquisition by
Nationwide (continued)
The impact of these on selected 30 September 2023 balance sheet notes is as follows(1):
Other assets (note 3.4)
As originally presented
Restated
£m
£m
Property, plant and equipment(2)
184
-
Investment properties(2)
40
-
Finance sub-leases
2
2
Investment in associates
10
10
Prepayments(3)
59
-
Other receivables(4)
66
52
Current tax(3)
21
-
Other
6
6
388
70
(1)
In the relevant note to the financial statements, only the restated position will be presented, with a footnote directing the user to this note for the detailed
changes.
(2)
Property, plant and equipment (£184m) and investment properties (£40m) less the accounting policy alignment (£10m) following the change in accounting
policy above, have been combined (£214m) and are now presented as a separate balance sheet line item.
(3)
Now presented as a separate balance sheet line item.
(4)
Reduced by £14m to £52m as a result of the presentation change of LCH collateral which is now included within due from other banks and similar institutions.
Other liabilities (note 3.5)
As originally presented
Restated
£m
£m
Notes in circulation
1,675
1,675
Accruals and deferred income(1)
67
-
Other(2)
414
284
2,156
1,959
(1)
Now presented as a separate balance sheet line item.
(2)
Reduced by £130m to £284m as a result of the presentation change of LCH collateral which is now included within the deposits line item in due to other banks
and similar institutions (refer to note 3.1.1.5).
(iii) Statement of cash flows
The majority of the restatement impacts on the statement of cash flows, related notes and cash and cash equivalents are as a
result of alignment to the preferred Nationwide presentation. The following tables cover each separate area of the statement of
cash flow (operating, investing and financial activities), highlighting the material Nationwide alignment changes and also
provides detail on the material Nationwide alignment changes required to the notes to the cash flow statements (non-cash or
non-operating items, changes to operating assets and liabilities and cash and cash equivalents):
The impact of these on the 30 September 2023 consolidated statement of cash flows is as follows:
Operating activities
As
originally
presented
Accounting
policy
adjustments
Reallocations
Nationwide
alignment
Restated
£m
£m
£m
£m
£m
Profit on ordinary activities before tax
345
12
-
-
357
Adjustments for:
Non-cash or non-operating items included in profit
before tax (see separate table)
(1,207)
(11)
-
1,695
477
Changes in operating assets and liabilities (see
separate table)
-
-
(260)
(297)
(557)
Changes in operating assets
(544)
-
544
-
-
Changes in operating liabilities
284
-
(284)
-
-
Payments for short term and low value leases
(3)
-
-
3
-
Interest received
3,300
-
-
(3,300)
-
Interest paid
(1,173)
-
-
1,173
-
Tax (paid)/received
(48)
-
-
-
(48)
Net cash provided by/(used in) operating
activities
954
1
-
(726)
229
Material Nationwide alignment changes include:
•
Detail on changes in the non-cash/non-operating and operating assets and liabilities line items is provided separately;
and
•
Operating interest paid and received are no longer added back and now flow through balance sheet movements.
135
Notes to the consolidated financial statements (continued)
Section 1: Basis of preparation (continued)
1.7
Changes to accounting policies and presentation as a result of the acquisition by
Nationwide (continued)
Non-cash or non-operating items included in
profit before tax
As
originally
presented
Accounting
policy
adjustments
Reallocations
Nationwide
alignment
Restated
£m
£m
£m
£m
£m
Interest receivable
(3,833)
-
-
3,833
-
Interest payable
2,146
-
-
(2,004)
142
Depreciation, amortisation and impairment
116
(11)
-
-
105
Derivative financial instruments fair value movements
12
-
-
-
12
Net increase/(decrease) on impairment losses on
credit exposures
309
-
-
(151)
158
Net increase/(decrease) on provisions for liabilities
and charges
31
-
-
(11)
20
Equity based compensation
5
-
-
-
5
Gain on disposal of FVOCI assets
(1)
-
1
-
-
Amortisation and (gains)/losses on investment
securities (including IFRS 3)
-
-
(1)
66
65
Net credit on retirement benefit obligations
-
-
(49)
-
(49)
Other non-cash movements
8
-
49
(38)
19
Total
(1,207)
(11)
-
1,695
477
Material Nationwide alignment changes include:
•
Operating interest paid and received are no longer added back and now flow through balance sheet movements;
•
Net increase/(decrease) on impairment losses on credit exposures now reflects only the balance sheet movement;
•
Net increase/(decrease) on provisions for liabilities and charges now reflects only the balance sheet movement; and
•
IFRS 3 fair value unwinds now separately disclosed.
Changes in operating assets and liabilities
As
originally
presented
Reallocations
Nationwide
alignment
Restated
£m
£m
£m
£m
Balances with supervisory central banks
-
-
(142)
(142)
Net derivative financial instruments
(306)(1)
-
(261)
(567)
Due from other banks and similar institutions
-
26
(27)
(1)
Financial assets at FVTPL
18
(18)
-
-
Loans and advances to customers
(303)
10
90
(203)
Defined benefit pension assets
(7)
-
-
(7)
Other assets
17
(18)
-
(1)
Due to other banks and similar institutions
(627)
(59)(2)
(939)
(1,625)
Customer deposits
1,249
-
145
1,394
Provision for liabilities and charges
(14)
-
14
-
Debt securities
-
-
823
823
Other liabilities
(287)
59
-
(228)
Total
(260)(3)
-
(297)
(557)
(1)
Originally presented separately as a £269m change in operating assets and a £37m change in operating liabilities.
(2)
Relates to the repointing of LCH collateral between due to other banks and similar institutions and other liabilities.
(3)
Originally presented separately as a (£544m) change in operating assets and a £284m change in operating liabilities.
Material Nationwide alignment changes include:
•
The removal of collateral and interest accruals from balances with supervisory central banks;
•
The removal of interest accruals from derivative financial instruments;
•
The removal of interest accruals and the impact of the change in impairment losses on credit exposures on loans and
advances to customers;
•
Amounts repaid under the TFSME from financing and the removal of interest accruals have impacted due to other banks
and similar institutions;
•
The removal of interest accruals from customer deposits; and
•
Issuance and repayments of RMBS and covered bonds and the inclusion of operating interest for debt securities.
136
Notes to the consolidated financial statements (continued)
Section 1: Basis of preparation (continued)
1.7
Changes to accounting policies and presentation as a result of the acquisition by
Nationwide (continued)
Cash and cash equivalents
As originally
presented
Nationwide
alignment(1)
Restated
£m
£m
£m
Cash and balances with central banks (less mandatory deposits and collateral
values)(2)
11,007
(811)
10,196
Due from other banks and similar institutions (less than three months)
666
(267)
399
Cash and cash equivalents
11,673
(1,078)
10,595
(1)
Relates solely to the removal of collateral balances from what is reported as cash and cash equivalents.
(2)
Also amended in note 3.1.1.2.
Investing activities
As originally
presented
Nationwide
alignment(1)
Restated
£m
£m
£m
Interest received(1)
232
(232)
-
Proceeds from sale and maturity of FVOCI investments
1,868
-
1,868
Purchase of FVOCI investments
(2,950)
-
(2,950)
Proceeds from sale of property, plant and equipment
1
-
1
Purchase of property, plant and equipment
(9)
-
(9)
Purchase and development of intangible assets
(11)
-
(11)
Net cash used in investing activities
(869)
(232)
(1,101)
(1)
This is operating interest and has been removed from the investing category.
Financing activities
As
originally
presented
Reallocations
Nationwide
alignment
Restated
£m
£m
£m
£m
Interest paid
(742)
129
613
-
Interest paid on financial liabilities
-
(129)
-
(129)
Repayment of principal portion of lease liabilities
(24)
-
-
(24)
Redemption and principal repayment on RMBS and covered bonds
(1,012)
-
1,012
-
Redemption and principal repayment on financial liabilities
(432)
-
-
(432)
Redemption of AT1 securities
(72)
-
-
(72)
Issuance of RMBS and covered bonds
1,826
-
(1,826)
-
Issuance of financial liabilities
747
-
-
747
Amounts repaid under the TFSME
(1,000)
-
1,000
-
Share buybacks and purchase of own shares
(112)
-
-
(112)
AT1 distributions
(54)
-
-
(54)
Ordinary dividends paid
(148)
-
-
(148)
Net cash (used in)/provided by financing activities
(1,023)
-
799
(224)
Material Nationwide alignment changes include:
•
Interest paid on operating activities and debt securities has been removed and interest paid on financial liabilities
(subordinated notes and MTNs) reallocated;
•
Issuance and repayments of RMBS and covered bonds are now included in changes to operating assets and liabilities
(debt securities); and
•
Amounts repaid under the TFSME are now included in changes to operating assets and liabilities (due to other banks
and similar institutions).
137
Notes to the consolidated financial statements (continued)
Section 1: Basis of preparation (continued)
1.7
Changes to accounting policies and presentation as a result of the acquisition by
Nationwide (continued)
As a consequence of moving term funding schemes, RMBS and covered bonds from financing activities to operating activities,
the following changes were required to the movements in liabilities arising from financing activities table:
As originally presented
Term
funding
schemes
Debt
securities in
issue
Lease
liabilities
Total
£m
£m
£m
£m
At 1 October 2022
7,230
8,509
132
15,871
Cash flows:
Issuances
-
2,573
-
2,573
Redemptions
-
(1,444)
-
(1,444)
Repayment
(1,000)
-
(24)
(1,024)
Tax paid
-
-
(1)
(1)
Non-cash flows:
Fair value and other associated adjustments
-
59
-
59
Additions to right-of-use asset in exchange for increased lease
liabilities
-
-
76
76
Remeasurement
-
-
(6)
(6)
Movement in accrued interest
61
27
3
91
Unamortised costs
-
(5)
-
(5)
At 30 September 2023
6,291
9,719
180
16,190
Restated
At 1 October 2022
3,162
132
3,294
Cash flows:
Issuances
747
-
747
Redemptions
(432)
-
(432)
Repayment
-
(24)
(24)
Tax paid
-
(1)
(1)
Non-cash flows:
Fair value and other associated adjustments
74
-
74
Additions to right-of-use asset in exchange for increased lease
liabilities
-
76
76
Remeasurement
-
(6)
(6)
Movement in accrued interest
15
3
18
Unamortised costs
(2)
-
(2)
At 30 September 2023
3,564
180
3,744
Material Nationwide alignment changes include:
•
Term funding schemes have been removed from financing activities and are now reflected in operating activities;
•
The opening balance of debt securities in issue has been reduced by £5,347m with the removal of the opening balances
for securitisation (£1,880m) and covered bonds (£3,467m) as these are now reflected in operating activities;
•
Issuances has been reduced by £1,826m with the removal of securitisation issuances of £900m and covered bonds
issuances of £926m as these are now reflected in operating activities; and
•
Redemptions has been reduced by £1,012m with the removal of securitisation redemptions as these are now reflected in
operating activities.
In respect of the current 18-month period to 31 March 2025, there have been other accounting presentational changes to the
income statement and balance sheet to align with the preferred presentation of Nationwide that have not resulted in a
restatement of the prior period position. While these changes impact the current reporting period only, they do not significantly
impact the comparability of the prior period presentation.
138
Notes to the consolidated financial statements (continued)
Section 1: Basis of preparation (continued)
1.8
Other changes
Expected credit losses
During the period, the Group reviewed the existing staging approach for credit cards in the Consumer lending portfolio which
focused on the triggers that move exposures from Stage 1 (requiring a 12-month ECL calculation) to Stage 2 (requiring a
lifetime ECL calculation). The overall impact of these changes has been to reduce the modelled ECL in the Consumer lending
portfolio by £31m.
In addition, the Group included a fourth economic scenario and adjusted the weightings of all scenarios accordingly, with the
source of macroeconomic assumptions used in the Group’s IFRS 9 models also now aligned with those of Nationwide (further
detail can be found on pages 43 to 49 of the credit risk section in the Risk report).
139
Notes to the consolidated financial statements (continued)
Section 2: Results for the period
2.1 Net interest income
Accounting policy
Interest income is recognised using the effective interest method which discounts the estimated future cash payments or
receipts, at the EIR, over the expected life of the financial instrument to the gross carrying amount of the non-credit impaired
financial asset. Interest expense is recognised using the same effective interest method on the amortised cost of the financial
liability.
When calculating the EIR, cash flows are estimated considering all contractual terms of the financial instrument (for example
prepayment, call and similar options) excluding future credit losses. The calculation includes all amounts paid or received that
are an integral part of the EIR such as transaction costs and all other premiums or discounts. Where it is not possible to reliably
estimate the cash flows or the expected life of a financial instrument (or group of financial instruments), the contractual cash
flows over the full contractual term of the financial instrument (or group of financial instruments) are used.
Loan origination and commitment fees are recognised within the EIR calculation. Fees in relation to the non-utilisation of a
commitment are recognised as revenue upon expiry of the agreed commitment period.
Interest income on financial assets in Stages 1 and 2 is recognised on the gross carrying value of the financial asset using the
original EIR. Once a financial asset or group of similar financial assets has been categorised as credit-impaired (Stage 3),
interest income is recognised on the net carrying value (which is after deducting the ECL allowance from the gross lending)
using the asset’s original EIR. Interest income for POCI financial assets is calculated using the credit-adjusted EIR applied to
the amortised cost of the financial asset from initial recognition. The Group recognises and presents the reversal of ECLs
following the curing of a credit impaired financial asset as a reversal of impairment losses. The Group’s policy on ECLs can be
found in note 3.1.1.
Interest income includes finance lease income, which is recognised at a constant periodic rate of return on the net investment.
Interest income and interest expense on hedged assets and liabilities and financial assets and liabilities designated as FVTPL
are also recognised as part of NII.
Interest income and interest expense on derivatives economically hedging interest bearing financial assets or liabilities (but not
designated as hedging instruments) and other financial assets and liabilities held at FVTPL (either mandatory or by election) are
presented as other similar interest within NII.
Changes to EIR
During the period, and as a result of the acquisition by Nationwide, material changes were made to the way the Group
calculates EIR resulting in a significant reduction to the EIR adjustment recognised at the end of the period.
The principal changes to the Group’s accounting policies for EIR were:
•
Mortgages: the removal of standard variable rate interest cash flows at the end of the initial product term; and
•
Credit cards: a change to the unit of account methodology from the full contract with the customer to each individual card
transaction.
As a result of these changes, the Group no longer recognises an EIR adjustment for credit cards (2023: originally presented EIR
adjustment of £259m) with an immaterial EIR adjustment now recognised for mortgages (2023: originally presented EIR
adjustment of £209m).
140
Notes to the consolidated financial statements (continued)
Section 2: Results for the period (continued)
2.1 Net interest income (continued)
18 months to
31 Mar 2025
12 months to
30 Sep 2023
£m
£m
Restated(1)
Interest income
Loans and advances to customers
5,711
3,170
Loans and advances to other banks
814
435
Financial assets at FVOCI
473
245
6,998
3,850
Interest on net defined benefit pension surplus (note 3.3)
44
55
Total interest income
7,042
3,905
Other similar interest
Financial assets at FVTPL
4
3
Other interest
1
-
Total other similar interest
5
3
Less: interest expense and similar charges
Customer deposits
(3,135)
(1,233)
Debt securities in issue
(981)
(537)
Due to other banks and similar institutions
(376)
(372)
Due to parent entity
(6)
-
Other interest expense
(7)
(4)
Total interest expense and similar charges
(4,505)
(2,146)
Net interest income
2,542
1,762
(1)
The prior year has been restated following the alignment of the Group’s accounting policies and presentation basis with Nationwide. Refer to note 1.7 for further
details.
2.2 Fee and commission income and expense
Accounting policy
Fees and commissions receivable which are not an integral part of the EIR are recognised as income as the Group fulfils its
performance obligations. The Group’s principal performance obligations arising from contracts with customers are in respect of
current accounts, debit cards and credit cards. The Group provides the service and consequently generates the fee and
commission income monthly, with amounts recognised in income on this basis. Costs incurred to generate this income are
charged to fees and commissions expense as they are incurred.
12 months to 30 September 2023
18 months to 31 March 2025
Restated(1)
Income
£m
Expense
£m
Net
£m
Income
£m
Expense
£m
Net
£m
Current account and savings
63
(49)
14
47
(30)
17
Insurance, protection and investments
32
(5)
27
7
-
7
Credit cards
85
(49)
36
58
(24)
34
Business
101
(8)
93
66
(4)
62
Mortgages
6
(3)
3
6
-
6
Other fees and commissions
1
(5)
(4)
2
-
2
288
(119)
169
186
(58)
128
(1)
The prior year has been restated following the alignment of the Group’s accounting policies and presentation basis with Nationwide. Refer to note 1.7 for further
details.
141
Notes to the consolidated financial statements (continued)
Section 2: Results for the period (continued)
2.3 Other operating income
Accounting policy
This includes:
•
Losses on revaluation of properties held at fair value - these relate to fair value movements of property and investment
property held at fair value.
•
Other financial assets designated at FVTPL - these relate principally to the Group’s fixed interest rate loan portfolio, which
were designated at inception as FVTPL. The fair value of these loans is derived from the future loan cash flows using
appropriate discount rates and includes adjustments for credit risk and credit losses. Also included here are fair value
changes in equity investments.
18 months to
31 Mar 2025
12 months to
30 Sep 2023
£m
£m
Restated(1)
Other operating income
Margin on foreign exchange derivative brokerage
32
19
Gains on sale of financial assets at FVOCI
1
1
Fair value gains on designated FVTPL equity
-
2
Losses on revaluation of properties held at fair value
(8)
(17)
Share of JV loss after tax
(1)
-
Other income
16
4
40
9
(1)
The prior year has been restated following the alignment of the Group’s accounting policies and presentation basis with Nationwide. Refer to note 1.7 for further
details.
The Group's unrecognised share of profits in JVs for the period was £1m (12 months to 30 September 2023: £6m loss). For loss
making entities, subsequent profits earned are not recognised until previously unrecognised losses are extinguished. On a
cumulative basis, the Group's unrecognised share of losses net of unrecognised profits of JVs is £14m (30 September 2023:
£15m).
On 2 April 2024 the Group acquired the remaining c50% ordinary share capital of Virgin Money Unit Trust Managers Limited
(UTM), a JV with abrdn, for £20m. UTM is now a wholly owned subsidiary. Prior to the acquisition date, the Group classed UTM
as a JV accounted for under the equity method. Details of the acquisition are shown in note 5.6.
2.4 Losses from derivatives and hedge accounting
Accounting policy
This includes:
•
Derivatives classified as held for trading - the full change in fair value of trading derivatives is recognised inclusive of
interest income and interest expense arising on those derivatives except when economically hedging other assets and
liabilities at fair value as outlined in note 2.1.
•
Hedged assets, liabilities and derivatives designated in hedge relationships - fair value movements are recognised on both
the hedged item and hedging derivative in a fair value hedge relationship, the net of which represents hedge
ineffectiveness, and hedge ineffectiveness on cash flow hedge relationships (note 3.1.3.1).
18 months to
31 Mar 2025
12 months to
30 Sep 2023
£m
£m
Restated(1)
Losses from derivatives and hedge accounting
(Losses)/gains from fair value hedge accounting(2)
(74)
33
Gains/(losses) from cash flow hedge accounting
64
(48)
Fair value gains from other derivatives
6
1
(4)
(14)
(1)
The prior year has been restated following the alignment of the Group’s accounting policies and presentation basis with Nationwide. Refer to note 1.7 for further
details.
(2)
Includes gains/(losses) from portfolio hedges of interest rate risk arising from amortisation of existing balance sheet amounts and hedge ineffectiveness.
142
Notes to the consolidated financial statements (continued)
Section 2: Results for the period (continued)
2.5 Operating and administrative expenses
18 months to
31 Mar 2025
12 months to
30 Sep 2023
£m
£m
Restated(1)
Staff costs
Wages and salaries
492
297
Bonuses
95
25
Social security costs
72
38
Pension costs
103
61
Other staff costs
75
69
Total staff costs
837
490
Property costs
70
74
Technology costs
356
216
Other operating costs
780
331
Depreciation, amortisation and impairment
124
105
Customer redress, legal and regulatory provisions
2
1
Bank levy
-
2
Total
2,169
1,219
(1)
The prior year has been restated following the alignment of the Group’s accounting policies and presentation basis with Nationwide. Refer to note 1.7 for further
details.
Included within other operating costs is £275m relating to the brand licence agreement with Virgin Enterprises Limited (VEL), which
governs the use of the ‘Virgin Money’ brand (the ‘TMLA’) following the acquisition by Nationwide in the period, with a TMLA fee of
£250m plus irrecoverable VAT of £50m due to VEL. The TMLA fee is payable in two equal instalments, with the first paid in
October 2024. The full TMLA fee of £250m and the irrecoverable VAT on the first instalment of £25m have been recognised in the
period. The VAT payable on the second instalment will be recognised in October 2025 in line with the scheduled payment.
The average number of full time equivalent (FTE) employees of the Group during the period was made up as follows:
18 months to
31 Mar 2025
12 months to
30 Sep 2023
Number
Number
Managers(1)
3,648
3,436
Clerical staff
3,657
3,730
7,305
7,166
(1)
Includes a combination of managers with and without staff responsibilities.
The average monthly number of employees was 8,157 (12 months to 30 September 2023: 8,110). All staff are contracted
employees of the Group and its subsidiary undertakings. The average figures above do not include contractors.
143
Notes to the consolidated financial statements (continued)
Section 2: Results for the period (continued)
2.5 Operating and administrative expenses (continued)
Auditor's remuneration included within other operating and administrative expenses comprises the following:
18 months to
31 Mar 2025
12 months to
30 Sep 2023
£'000
£'000
Fees payable to the Company’s auditor for the audit of the Company’s
financial statements
28
25
Fees payable to the Company’s auditor for the audit of the Company’s
subsidiaries(1)
8,774
4,787
Total audit fees
8,802
4,812
Audit related assurance services
952
562
Other assurance services
92
276
Total non-audit fees
1,044
838
Fees payable to the Company’s auditor in respect of associated pension
schemes
181
126
Total fees payable to the Company’s auditor
10,027
5,776
(1)
Includes the audit of the Group’s structured entities
Non-audit fees of £1m (12 months to 30 September 2023: £1m) were paid to the auditor during the period for services including
TFSME assurance, the review of the Interim Financial Reports, PRA Written Auditor Reporting, comfort letters for the covered
bond programmes, client money reviews and profit attestations.
Out of pocket expenses of £80k (12 months to 30 September 2023: £26k) were borne by the Group during the period.
2.6 Taxation
Accounting policy
Deferred tax assets and liabilities are recognised on temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the financial statements. Deferred tax is determined using tax rates and laws that have
been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred tax asset
is realised, or the deferred tax liability is settled.
A deferred tax asset is recognised for unused tax losses and unused tax credits only if it is probable that future taxable amounts
will arise against which those temporary differences and losses may be utilised.
Critical accounting estimates and judgements
In arriving at the Group’s deferred tax asset balance of £318m (30 September 2023 (restated): £286m), significant judgement is
exercised on the component of deferred tax assets that relate to tax losses carried forward of £178m (30 September 2023
(restated): £240m).
The Group has assessed the likelihood of recovery of the deferred tax assets at 31 March 2025, and considers it probable that
sufficient future taxable profits will be available over the corporate planning horizon against which the underlying deductible
temporary differences can be utilised. Deferred tax assets are recognised to the extent that they are expected to be utilised
within six years of the balance sheet date. If, instead of six years, the period were five or seven years, the total recognised
deferred tax asset would decrease to £274m or increase to £362m respectively. If Group taxable profit forecasts were 10%
lower than anticipated, the total deferred tax asset would be £299m. If Group taxable profit forecasts were 10% higher than
anticipated, the deferred tax asset would be £337m. All tax assets arising will be used within the UK.
144
Notes to the consolidated financial statements (continued)
Section 2: Results for the period (continued)
2.6 Taxation (continued)
18 months to
31 Mar 2025
12 months to
30 Sep 2023
£m
£m
Restated(1)
Current tax
Current period
(45)
36
Adjustment in respect of prior years
2
2
(43)
38
Deferred tax
Current period
82
89
Adjustment in respect of prior years
-
(5)
82
84
Tax expense for the period
39
122
(1)
The prior year has been restated following the alignment of the Group’s accounting policies and presentation basis with Nationwide. Refer to note 1.7 for further
details.
The tax assessed for the 18 month period differs from that arising from applying the standard rate of corporation tax in the UK of
25% (12 months to 30 September 2023: 22%). A reconciliation from the expense implied by the standard rate to the actual tax
expense is as follows:
18 months to
31 Mar 2025
12 months to
30 Sep 2023
£m
£m
Restated(1)
Profit on ordinary activities before tax
149
357
Tax expense based on the standard rate of corporation tax in the UK of 25%
(30 September 2023: 22%)
38
79
Effects of:
Disallowable expenses
11
5
Conduct indemnity adjustment
-
(1)
Deferred tax assets derecognised
45
36
Banking surcharge
3
5
Impact of rate changes
(35)
13
AT1 distribution
(25)
(12)
Adjustments in respect of prior years
2
(3)
Tax expense for the period
39
122
(1)
The prior year has been restated following the alignment of the Group’s accounting policies and presentation basis with Nationwide. Refer to note 1.7 for further
details.
The Group’s effective tax rate is 26.4% (12 months to 30 September 2023 (restated): 34.2%). This is only marginally higher that
the standard rate of corporation tax because the impact of loss de-recognition plus disallowable expenses arising on strategic
projects is mitigated by credits for AT1 distributions and rate change. The rate change credit (35% to 25%) arises on the
authorised surplus payments charge following a change in law effective 6 April 2024.
145
Notes to the consolidated financial statements (continued)
Section 2: Results for the period (continued)
2.6 Taxation (continued)
The Group has recognised deferred tax in relation to the following items in the balance sheet, income statement, and statement
of other comprehensive income:
Movement in deferred tax asset/(liability)
Group
Acquisition
accounting
adjustments
Cash
flow
hedge
reserve
EIR
Asset
Gains on
financial
instruments
at FVOCI
Tax
losses
carried
forward
Capital
allowances
Other
temporary
differences
Total
deferred
tax
assets(1)
Defined
benefit
pension
scheme
surplus
Total
deferred
tax
liabilities
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
At 1 October 2022 (as reported)
(8)
(267)
-
(16)
302
111
24
146
(350)
(350)
Restatements(1)
-
-
125
-
(9)
-
-
116
-
-
At 1 October 2022 (restated)
(8)
(267)
125
(16)
293
111
24
262
(350)
(350)
Income statement credit/(charge)
2
1
(5)
-
(53)
(8)
(4)
(67)
(17)
(17)
Other comprehensive income credit
-
77
-
14
-
-
-
91
188
188
At 30 September 2023
(6)
(189)
120
(2)
240
103
20
286
(179)
(179)
Income statement credit/(charge)
2
-
(19)
-
(63)
(18)
(6)
(104)
22
22
Deferred taxes acquired in business combinations
-
-
-
-
1
-
(1)
-
-
-
Other comprehensive income credit
-
125
-
11
-
-
-
136
68
68
At 31 March 2025
(4)
(64)
101
9
178
85
13
318
(89)
(89)
(1)
The prior year has been restated following the alignment of the Group’s accounting policies and presentation basis with Nationwide. Refer to note 1.7 for further
details.
The deferred tax assets and liabilities detailed above arise primarily in Clydesdale Bank PLC which has a right to offset current
tax assets against current tax liabilities and is party to a Group Payment Arrangement for payments of tax to HMRC. Therefore,
in accordance with IAS 12, deferred tax assets and deferred tax liabilities have also been offset in this period where they relate
to payments of income tax to this tax authority.
The Group has unrecognised deferred tax assets of £108m (30 September 2023: £49m (restated)) on £401m gross trading
losses (30 September 2023: £196m (restated)) and £31m gross unrealised capital losses valued at the mainstream rate of 25%
representing tax losses whose use is not forecast within the foreseeable future. The unrealised capital losses arise due to the
change in accounting policy for property assets to fair value.
Other temporary differences include deferred tax assets for the IFRS 9 transitional adjustment of £6m and employee incentives
of £7m (30 September 2023: £9m and £5m respectively).
On 11 July 2023, the UK Government enacted legislation to implement the G20-OECD Inclusive Framework Pillar 2 rules in the
UK, including Qualified Domestic Minimum Top-Up Tax rules, to ensure that large UK-headquartered enterprises pay a
minimum tax rate of 15% on UK and overseas profits. The legislation is effective for accounting periods beginning on or after 31
December 2023. As the Group was acquired by Nationwide on 1 October 2024, further disclosures on the impact of the Pillar 2
rules on the Nationwide group can be found in the Nationwide Annual Report and Accounts for the year ended 31 March 2025.
As mandated by IAS 12, the exemption to recognise and disclose information about deferred tax assets and liabilities related to
Pillar 2 income taxes has been applied by the Group.
146
Notes to the consolidated financial statements (continued)
Section 3: Assets and liabilities
3.1 Financial instruments
Accounting policy
Recognition and derecognition
Financial instruments are recognised when the Group becomes party to the contractual provisions of the instrument. Purchases
and sales of financial assets classified within FVTPL or FVOCI are predominantly recognised on trade date.
The Group derecognises a financial asset when the contractual cash flows from the asset expire or it transfers the right to
receive contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of
ownership are transferred. Financial liabilities are derecognised when the Group has discharged its obligation to the contract, or
the contract is cancelled or expires.
Note 3.1.4 contains information on the valuation techniques and methodologies applied to financial instruments and their
classification within the fair value hierarchy.
Classification and measurement
The Group measures a financial asset or liability on initial recognition at its fair value, plus or minus transaction costs that are
directly attributable to the acquisition or issue of the financial asset or the financial liability (with the exception of financial assets
or liabilities at FVTPL, where transaction costs are recognised directly in the income statement as they are incurred).
Subsequent accounting for a financial asset is determined by the classification of the asset depending on the underlying
business model and contractual cash flow characteristics. This results in classification within one of the following categories: (i)
amortised cost (note 3.1.1); (ii) FVOCI (note 3.1.2); or (iii) FVTPL (note 3.1.3).
Repurchase agreements
Securities sold subject to sale and repurchase agreements (‘repo’) are retained in their respective balance sheet categories.
The associated liabilities are included in amounts due to other banks and similar institutions based upon the counterparties to
the transactions. The difference between the sale and repurchase price of repos is treated as interest and accrued over the life
of the agreements using the effective interest method.
Offsetting
This can only occur, and the net amount be presented on the balance sheet, when the Group currently has a legally enforceable
right to offset the recognised amounts and intends either to settle on a net basis, or to realise the asset and settle the liability
simultaneously.
Presentation of risk, offsetting and maturity disclosures
Certain disclosures required under IFRS 7 ‘Financial instruments: disclosures’ and IAS 1 ‘Presentation of financial statements’
have been included within the audited sections of the Risk report. Where information is marked as audited, it is incorporated into
these financial statements by this cross reference, and it is covered by the Independent auditor’s report.
147
Notes to the consolidated financial statements (continued)
Section 3: Assets and liabilities (continued)
3.1.1 Financial instruments at amortised cost
Accounting policy
A financial asset is measured at amortised cost when: (1) the asset is held within a business model whose objective is achieved
by collecting contractual cash flows; and (2) the contractual terms give rise to cash flows on specified dates which are solely
payments of principal and interest on the principal amount outstanding.
All financial liabilities are measured at amortised cost, except for financial liabilities at FVTPL. Such liabilities include derivative
contracts, other than those which are financial guarantee contracts or designated and effective hedging instruments.
Financial assets classified at amortised cost are subject to ECL impairment requirements.
At each reporting date, the Group assesses financial assets measured at amortised cost, as well as loan commitments and
financial guarantees not measured at FVTPL, for impairment. The impairment loss allowance is calculated using an ECL
methodology and reflects: (i) an unbiased and probability weighted amount; (ii) the time value of money which discounts the
impairment loss; and (iii) reasonable and supportable information that is available without undue cost or effort at the reporting
date about past events, current conditions and forecasts of future economic conditions.
ECL methodology is based upon the combination of PD, LGD and EAD estimates that consider a range of factors that impact
on credit risk and consequently the level of impairment loss provisioning. The Group uses reasonable and supportable forecasts
of future economic conditions in estimating the ECL allowance. The methodology and assumptions used in the ECL calculation
are reviewed regularly and updated as necessary. ECLs are assessed either collectively or individually.
The Group’s impairment policy for debt instruments at FVOCI is included in note 3.1.2. The impact of the ECL methodology on
amounts due from other banks and similar institutions balances held at amortised cost is immaterial. ECLs relating to loan
commitments and financial guarantees can be found in note 3.7.
SICR assessment and staging
The ECL is calculated as either 12-month (Stage 1) or lifetime depending on whether the financial asset has suffered a SICR
since origination (Stage 2) or has otherwise become credit impaired (Stage 3) as at the reporting date. The Group uses a PD
threshold curve (distinct for each portfolio) to assess for a SICR in addition to the 30 DPD and 90 DPD backstops for
recognising Stage 2 and Stage 3 ECLs respectively.
Financial assets can move between stages when the relevant staging criteria are no longer satisfied subject to certain
restrictions for forborne assets. If the level of impairment loss reduces in a subsequent year, the previously recognised
impairment loss allowance is reversed and recognised in the income statement.
POCI financial assets are those which are credit impaired upon initial recognition (being the point at which the asset was either
purchased or originated). Once a financial asset is classified as POCI, it remains as such until derecognition irrespective of its
credit quality at each reporting date. POCI financial assets are disclosed separately from those financial assets in Stage 3. The
Group regards the date of acquisition as the origination date for purchased portfolios.
Regardless of the calculation basis, the Group generates a modelled ECL allowance at the individual financial instrument level.
The modelled ECL output can be supplemented by management adjustments (MAs) where appropriate.
Write-offs and recoveries
When there is no reasonable expectation of recovery for a loan, it is written off against the related provision. Such loans are
written off after all the necessary procedures have been completed and the amount of the loss has been determined.
Subsequent recoveries of amounts previously written off decrease the amount of the impairment charge in the income
statement.
Critical accounting estimates and judgements
ECL methodology requires the Group to apply estimates and exercise judgement when calculating an impairment allowance for
credit exposures.
Further information on the chosen scenarios, macroeconomic assumptions, and scenario weightings used in the ECL
calculation, including the use of MAs together with sensitivity analysis, is contained in the credit risk section of the Risk report on
pages 40 to 49.
148
Notes to the consolidated financial statements (continued)
Section 3: Assets and liabilities (continued)
3.1.1.1 Loans and advances to customers
Accounting policy
Loans and advances to customers arise when the Group provides money directly to a customer and includes mortgages, term
lending, overdrafts, credit card lending, lease finance and invoice financing. They are recognised initially at fair value and are
subsequently measured at amortised cost, using the effective interest method and adjusted for ECLs. They are derecognised
when the rights to receive cash flows have expired or the Group has transferred substantially all the risks and rewards of
ownership.
Leases entered into by the Group as lessor, where the Group transfers substantially all the risks and rewards of ownership to
the lessee, are classified as finance leases. The leased asset is not held on the Group balance sheet; instead, a finance lease
is recognised representing the minimum lease payments receivable under the terms of the lease, discounted at the rate of
interest implicit in the lease. Interest income is recognised in interest receivable, allocated to accounting years to reflect a
constant periodic rate of return.
As at
31 Mar 2025
30 Sep 2023
£m
£m
Restated(1)
Gross loans and advances to customers
71,807
72,857
Impairment provisions on credit exposures(2)
(735)
(612)
71,072
72,245
(1)
The prior year has been restated following the alignment of the Group’s accounting policies and presentation basis with Nationwide. Refer to note 1.7 for further
details.
(2)
ECLs on off-balance sheet exposures of £4m (30 September 2023: £5m) are presented as part of the provisions for liabilities and charges balance (note 3.7)
The Group has a portfolio of fair valued business loans of £47m (30 September 2023: £59m) which are classified separately as
financial assets at FVTPL. Interest rate risk associated with these loans is managed using interest rate derivative contracts and
the loans are recorded at fair value to avoid an accounting mismatch. Combined with the above, this is equivalent to total gross
loans and advances to customers of £71,119m (30 September 2023 (restated): £72,304m).
The Group has transferred a proportion of mortgages to the securitisation and covered bond programmes (note 3.1.5). These
mortgages have not been derecognised from gross loans and advances to customers and remain on the Group’s balance
sheet.
Lease finance
The Group leases a variety of assets to third parties under finance lease arrangements, including vehicles and general plant and
machinery. The cost of assets acquired by the Group during the period for the purpose of letting under finance leases and hire
purchase contracts amounted to £163m (12 months to 30 September 2023: £71m) and £766m (12 months to 30 September
2023: £557m) respectively.
Finance lease receivables are presented in the statement of financial position within loans and advances to customers. The
maturity analysis of lease receivables, including the undiscounted lease payments to be received, is as follows:
Gross investment in finance lease and hire purchase receivables as at:
31 Mar 2025
30 Sep 2023
£m
£m
Less than 1 year
461
373
1-2 years
282
223
2-3 years
206
158
3-4 years
117
95
4-5 years
77
59
More than 5 years
26
31
1,169
939
Unearned finance income
(103)
(83)
Net investment in finance lease and hire purchase receivables
1,066
856
Finance income recognised on the net investment in the lease was £86m (12 months to 30 September 2023: £38m) and is
included in interest income (note 2.1).
149
Notes to the consolidated financial statements (continued)
Section 3: Assets and liabilities (continued)
3.1.1.1 Loans and advances to customers (continued)
Impairment provisions on credit exposures
As at
31 Mar 2025
30 Sep 2023
£m
£m
Opening balance
612
454
ECL charge for the period(1)
430
307
Amounts written off
(391)
(187)
Recoveries of amounts written off in previous years
84
38
Closing balance
735
612
(1)
The £429m charge for impairment losses on credit exposures shown in the income statement (12 months to 30 September 2023: £309m) also includes a
£1m credit in respect of off-balance sheet ECLs (12 months to 30 September 2023: £2m charge) which are presented as part of the provisions for
liabilities and charges balance (note 3.7).
Further details on the Group’s ECL provision can be found in the credit risk section of the Risk report (pages 11 to 49).
3.1.1.2 Cash and balances with central banks
Accounting policy
Cash and balances with central banks are measured at amortised cost, using the effective interest method and are
derecognised when the rights to receive cash flows have expired or the Group has transferred substantially all the risks and
rewards of ownership. These balances form part of the Group’s treasury-related activities and are mostly short term in nature
and repayable on demand or within a short timescale, generally three months.
The impact of the ECL impairment requirements (note 3.1.1) on the Group’s cash and balances with central banks is immaterial.
As at
31 Mar 2025
30 Sep 2023
£m
£m
Restated(1)
Cash assets
937
1,089
Balances with central banks (including EU payment systems)
9,945
10,193
10,882
11,282
Less mandatory deposits with central banks and collateral balances(1)(2)
(848)
(1,086)
Included in cash and cash equivalents (note 5.4)
10,034
10,196
(1)
The prior year has been restated following the alignment of the Group’s accounting policies and presentation basis with Nationwide. Following the acquisition by
Nationwide, cash and cash equivalents now also exclude collateral balances to align with the Nationwide definition, with the comparative period balance
impacted by the removal of £811m of collateral balances. Refer to note 1.7 for further details.
(2)
Mandatory deposits are not available for use in the Group’s day-to-day business and are non-interest bearing.
3.1.1.3 Customer deposits
As at
31 Mar 2025
30 Sep 2023
£m
£m
Interest bearing demand deposits
44,476
39,292
Term deposits
21,271
22,775
Non-interest bearing demand deposits
4,176
4,542
69,923
66,609
Accrued interest
460
218
70,383
66,827
150
Notes to the consolidated financial statements (continued)
Section 3: Assets and liabilities (continued)
3.1.1.4 Debt securities in issue
Accounting policy
Debt securities comprise short and long-term debt issued by the Group including medium-term notes, subordinated debt,
covered bonds and RMBS notes.
Debt securities are initially recognised at fair value, being the issue proceeds, net of transaction costs incurred. These
instruments are subsequently measured at amortised cost using the effective interest method resulting in premiums, discounts
and associated issuance costs being recognised in the income statement over the life of the instrument.
Where relevant, fair value hedge adjustments have been applied.
The breakdown of debt securities in issue is shown below:
31 March 2025
Group
Medium-
term notes
Subordinated
debt
Securitisation
Covered
bonds
Total
£m
£m
£m
£m
£m
Debt securities
2,586
746
2,135
4,357
9,824
Accrued interest
24
8
10
55
97
2,610
754
2,145
4,412
9,921
30 September 2023
Group
Medium-
term notes
Subordinated
debt
Securitisation
Covered
bonds
Total
£m
£m
£m
£m
£m
Debt securities
2,584
938
1,729
4,392
9,643
Accrued interest
28
14
11
23
76
2,612
952
1,740
4,415
9,719
Key movements in the 18-month period are shown in the tables below(1). Full details of all notes in issue can be found at
https://www.virginmoneyukplc.com/investor-relations/debt-investors/
31 Mar 2025
30 Sep 2023
Issuances
Redemptions
Issuances
Redemptions
Denomination
£m
Denomination
£m
Denomination
£m
Denomination
£m
Medium-term notes
EUR
641
EUR,GBP
(748)
EUR, GBP
747
EUR
(432)
Subordinated debt
-
GBP
(250)
-
-
-
-
Securitisation
GBP
800
GBP
(394)
GBP
900
USD, GBP
(1,012)
Covered bonds
GBP
500
GBP
(600)
EUR, GBP
926
-
-
1,941
(1,992)
2,573
(1,444)
(1)
Other movements relate to foreign exchange, hedging adjustments and the capitalisation and amortisation of issuance costs.
The following tables provide a breakdown of the medium-term notes and subordinated debt by instrument (excluding accrued
interest):
Medium-term notes
31 Mar 2025
30 Sep 2023
£m
£m
VM UK 3.125% fixed-to-floating rate callable senior notes due 2025
-
300
VM UK 4% fixed rate reset callable senior notes due 2026
493
463
VM UK 3.375% fixed rate reset callable senior notes due 2026
349
330
VM UK 4% fixed rate reset callable senior notes due 2027
379
350
VM UK 2.875% fixed rate reset callable senior notes due 2025
-
418
VM UK 4.625% fixed rate reset callable senior notes due 2028
424
421
VM UK 7.625% fixed rate reset callable senior notes due 2029
307
302
VM UK 4% fixed rate reset callable senior notes due 2028
634
-
2,586
2,584
151
Notes to the consolidated financial statements (continued)
Section 3: Assets and liabilities (continued)
3.1.1.4 Debt securities in issue (continued)
In addition to the above the Group issued medium-term notes of £754m (12 months to 30 September 2023: £Nil) to the Group’s
parent company, Nationwide. Medium-term notes comprise dated, unsecured loans. These securities will, in the event of the
winding-up of the issuer, be subordinated to the claims of the depositors and all other creditors of the issuer, other than
creditors whose claims rank junior to the claims of the medium-term note liabilities, including those of subordinated debt
holders. The debt is employed in the general business of the Group. These are classified as amounts due to related entities and
are included in note 5.3.
Subordinated debt
31 Mar 2025
30 Sep 2023
£m
£m
VM UK 7.875% fixed rate reset callable subordinated notes due 2028
-
250
VM UK 5.125% fixed rate reset callable subordinated notes due 2030
461
424
VM UK 2.625% fixed rate reset callable subordinated notes due 2031
285
264
746
938
Details of securitisation and covered bond issuances are included in note 3.1.5.
3.1.1.5 Due to other banks and similar institutions
31 Mar 2025
30 Sep 2023
£m
£m
Restated(1)
Secured loans
910
6,291
Securities sold under agreements to repurchase(2)
10
552
Transaction balances
32
149
Deposits
4
77
956
7,069
(1)
The prior year has been restated following the alignment of the Group’s accounting policies and presentation basis with Nationwide. Refer to note 1.7 for further
details.
(2)
The underlying securities sold under agreements to repurchase have a carrying value of £13m (30 September 2023: £1,047m) and relate to internally held
debt securities, backed by mortgage assets, issued from the Group’s securitisation programmes (note 3.1.5).
Secured loans comprise amounts drawn under the TFSME schemes (including accrued interest).
152
Notes to the consolidated financial statements (continued)
Section 3: Assets and liabilities (continued)
3.1.2 Financial assets at fair value through other comprehensive income
Accounting policy
A financial asset is measured at FVOCI when: (i) the asset is held within a business model whose objective is achieved by both
collecting contractual cash flows and selling financial assets; and (ii) the contractual terms give rise to cash flows on specified
dates which are solely payments of principal and interest on the principal amount outstanding unless the financial asset is
designated at FVTPL on initial recognition. An option for equity investments that are not held for trading can be taken to classify
them at FVOCI where an irrevocable election is made at initial recognition. This is available for each separate investment, and
the Group has not exercised this option for any equity investments.
Interest income and impairment gains and losses on FVOCI assets are measured in the same manner as for assets measured
at amortised cost and recognised in the income statement, with all other gains or losses recognised in other comprehensive
income as a separate component of equity in the period in which they arise. Gains and losses arising from changes in fair value
are included as a separate component of equity until sale, when the cumulative gain or loss is transferred to the income
statement. For all FVOCI assets, the gain or loss is calculated with reference to the gross carrying amount.
Debt instruments at FVOCI are subject to the same impairment criteria as amortised cost financial assets (note 3.1.1), with the
ECL element recognised directly in the income statement. As the financial asset is FVOCI, the change in its value includes the
ECL element, with the remaining fair value change recognised in other comprehensive income. Any reversal of the ECL is
recorded in the income statement up to the value recognised previously.
A low credit risk option is available which allows entities not to assess whether there has been a significant increase in credit
risk since initial recognition where the financial asset is deemed as being of low credit risk at the reporting date. The result of
exercising the low credit risk exemption is that the financial assets are classed under Stage 1 with a 12-month ECL calculation
applied. Following the acquisition by Nationwide, the Group no longer exercises the low credit risk option for debt instruments
classified as FVOCI. This has not impacted the ECL provision, which remains immaterial for these financial assets.
Financial assets at FVOCI consists of £6,197m of listed securities (30 September 2023: £6,184m).
Note 3.1.4 contains further information on the valuation methodology applied to financial instruments at FVOCI at 31 March
2025 and their classification within the fair value hierarchy. Details of the credit quality of financial assets are provided in the
Risk report.
153
Notes to the consolidated financial statements (continued)
Section 3: Assets and liabilities (continued)
3.1.3 Financial assets at fair value through profit or loss
Accounting policy
A financial asset is measured at FVTPL if it: (i) does not fall into one of the business models for amortised cost (note 3.1.1) or
FVOCI (note 3.1.2); (ii) is specifically designated as FVTPL on initial recognition in order to eliminate or significantly reduce a
measurement mismatch; or (iii) is classified as held for trading.
A financial instrument is classified as held for trading if it is acquired principally for the purpose of selling in the near term, forms
part of a portfolio of financial instruments that are managed together and for which there is evidence of short-term profit taking,
or it is a derivative not in a qualifying hedge relationship.
Associated gains and losses are recognised in the income statement as they arise (note 2.2).
Derivatives
The Group uses derivative financial instruments to manage exposure to interest rate, contractually specified inflation and foreign
currency risk. Interest rate risk arises primarily due to the mismatch, or duration, between repricing dates of interest-bearing assets
and liabilities, or basis risk from assets and liabilities repricing to different reference rates. Contractually specified inflation risk
arises from financial instruments whose cash flows are linked to an inflation index. Currency risk arises when assets and
liabilities are not denominated in the functional currency of the entity. Derivatives are recognised on the balance sheet at fair value
on trade date and are measured at fair value throughout the life of the contract. Derivatives are carried as assets when the fair
value is positive and as liabilities when the fair value is negative. The notional amount of a derivative contract is not recorded on the
balance sheet but is disclosed as part of this note.
Netting
Derivative assets and liabilities are offset against collateral received and paid respectively, and the net amount in the balance sheet
only when there is a legally enforceable right to offset the recognised amounts, and there is an intention to settle on a net basis.
Amounts offset on the balance sheet represent the Group’s centrally cleared derivative financial instruments and collateral paid
to/from central clearing houses, which meet the criteria for offsetting under IAS 32.
Hedge accounting
The Group elects to apply hedge accounting for the majority of its risk management activity that uses derivatives. This results in
greater alignment in the timing of recognition of gains and losses on hedged items and hedging instruments and therefore reduces
income statement volatility. The Group does not have a trading book, however derivatives that do not meet the hedging criteria, or
for which hedge accounting is not applied, are classified as held for trading.
For the period from 1 October 2023 to 30 September 2024, the Group elected, as a policy choice permitted under IFRS 9, to
continue to apply IAS 39 for hedge accounting. From 1 October 2024, the Group voluntarily adopted the hedge accounting
provisions of IFRS 9 on a prospective basis but has continued to apply the scope exception which allows ongoing application of
IAS 39 for fair value macro hedges. See note 1.6 for further details.
The method of recognising the fair value gain or loss on a derivative depends on whether it is designated as a hedging instrument
and the nature of the item being hedged. Certain derivatives are designated as either hedges of highly probable future cash flows
attributable to a recognised asset or liability, or a highly probable forecast transaction (a cash flow hedge); or hedges of the fair
value of recognised assets or liabilities or firm commitments (a fair value hedge).
Cash flow hedge
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in
equity. Specifically, the separate component of equity (note 4.1) is adjusted to the lesser of the cumulative gain or loss on the
hedging instrument and the cumulative change in fair value of the expected future cash flows on the hedged item from the
inception of the hedge. Any remaining gain or loss on the hedging instrument is recognised in the income statement. The carrying
value of the hedged item is not adjusted. Amounts accumulated in equity are transferred to the income statement in the period in
which the hedged item affects profit or loss.
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative
gain or loss remains in equity and is recognised when the forecast transaction is ultimately recognised in the income statement.
When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately
transferred to the income statement.
Fair value hedge
Fair value hedge accounting results in the carrying value of the hedged asset or liability being adjusted to reflect changes in fair
value attributable to the risk being hedged. This creates an offset to the fair value movements of the hedging instrument. Changes
in the fair value of the hedged items and hedging instruments are recorded in the income statement, except for changes in the fair
value of hedging instruments accounted for under IFRS 9 which are attributable to foreign currency basis spreads. Where foreign
currency basis spreads are excluded from hedge designation, this element of the fair valuation of the hedging instrument is instead
recognised directly within equity within the ‘other hedging reserve’.
154
Notes to the consolidated financial statements (continued)
Section 3: Assets and liabilities (continued)
3.1.3 Financial assets at fair value through profit or loss (continued)
Accounting policy
Where the hedged item is derecognised from the balance sheet, the adjustment to the carrying amount of the asset or liability is
immediately transferred to the income statement. When a hedging instrument expires or is sold, or when a hedge no longer meets
the criteria for hedge accounting, the adjustment to the carrying amount of a hedged item is amortised to the income statement
over the remaining life of the asset or liability.
At inception each hedge relationship is formally documented, including a description of the hedged item and the hedging
instrument, as well as the methods which will be used to assess the effectiveness of the hedge. Hedges accounted for under IFRS
9 are required to be effective on a prospective basis, in line with risk management strategy. Macro hedges which continue to be
accounted for under IAS 39 are required to be highly effective on both a retrospective and a prospective basis.
For macro fair value hedges which continue to be accounted for under IAS 39, the Group may also decide to cease hedge
accounting even though the hedge relationship continues to be highly effective by ceasing to designate the financial instrument as
a hedge. For hedges accounted for under IFRS 9, the Group is unable to voluntarily de-designate hedging relationships unless
there has been a change in risk management objectives.
Derivatives held for trading
Changes in value of held for trading derivatives are immediately recognised in the income statement (note 2.2).
3.1.3.1 Derivatives
The tables below analyse derivatives between those designated as hedging instruments and those classified as held for trading:
As at
31 Mar 2025
30 Sep 2023
£m
£m
Fair value of derivative financial assets
Designated as hedging instruments
27
96
Designated as held for trading
21
39
48
135
Fair value of derivative financial liabilities
Designated as hedging instruments
96
204
Designated as held for trading
36
86
132
290
Cash collateral totalling £98m (30 September 2023: £267m) has been pledged and £4m has been received (30 September
2023: £33m) in respect of derivatives with other banks. These amounts are included within due from and due to other banks
and similar institutions respectively. Net collateral received from clearing houses, which did not meet offsetting criteria, totalled
£8m (30 September 2023: £116m) and is included within other assets and other liabilities.
The derivative financial instruments held by the Group are further analysed below. The notional contract amount is the amount
from which the cash flows are derived and does not represent the principal amounts at risk relating to these contracts.
155
Notes to the consolidated financial statements (continued)
Section 3: Assets and liabilities (continued)
3.1.3.1 Derivative financial instruments (continued)
As at
31 Mar 2025
30 Sep 2023
Notional
contract
amount
£m
Fair value
of assets
£m
Fair value
of liabilities
£m
Notional
contract
amount
£m
Fair value
of assets
£m
Fair value
of liabilities
£m
Derivatives designated as hedging instruments
Cash flow hedges
Interest rate swaps (gross)
28,014
311
138
51,185
1,295
545
Less: net settled interest rate swaps(1)
(27,942)
(306)
(135)
(49,888)
(1,222)
(531)
Interest rate swaps (net)(2)
72
5
3
1,297
73
14
Fair value hedges
Interest rate swaps (gross)(3)
28,366
702
720
19,203
1,219
862
Less: net settled interest rate swaps(1)
(27,666)
(692)
(720)
(18,113)
(1,206)
(820)
Interest rate swaps (net)(2)
700
10
-
1,090
13
42
Cross currency swaps(2)
2,477
12
93
2,350
10
148
3,177
22
93
3,440
23
190
Total derivatives designated as hedging instruments
3,249
27
96
4,737
96
204
Derivatives designated as held for trading
Foreign exchange rate related contracts
Spot and forward foreign exchange(2)
510
3
4
654
7
9
Options(2)
-
-
-
-
-
-
510
3
4
654
7
9
Interest rate related contracts
Interest rate swaps (gross)
2,031
26
27
1,910
47
50
Less: net settled interest rate swaps(1)
(927)
(22)
(3)
(753)
(43)
(1)
Interest rate swaps (net)(2)
1,104
4
24
1,157
4
49
Swaptions(2)
10
-
1
10
-
1
Options(2)
1,164
5
5
1,067
16
16
2,278
9
30
2,234
20
66
Commodity related contracts
76
3
2
167
12
11
Equity related contracts
-
6
-
-
-
-
Total derivatives designated as held for trading
2,864
21
36
3,055
39
86
(1)
Presented within other assets and other liabilities.
(2)
Presented within derivative financial instruments.
(3)
Includes inflation and interest rate risk related swaps detailed in the summary of hedging instruments in designated hedge relationships table on page 157.
Hedge accounting
The hedging strategy of the Group is divided into micro hedges, where the hedged item is a distinctly identifiable asset or liability,
and portfolio hedges, where the hedged item is a homogeneous portfolio of assets or liabilities.
In some hedge accounting relationships, the Group designates risk components of hedged items as follows:
•
Benchmark interest rate risk as a component of interest rate risk, such as the SONIA component.
•
Exchange rate risk for foreign currency financial assets and financial liabilities.
•
Inflation risk where it is a contractually specified component of a debt instrument.
•
Components of cash flows of hedged items, for example cash flows linked to benchmark rates such as SONIA.
Other risks such as credit risk and liquidity risk are managed by the Group but are not included in the hedge accounting
relationship. Changes in the designated risk component usually account for the largest portion of the overall change in fair value
or cash flows of the hedged item.
156
Notes to the consolidated financial statements (continued)
Section 3: Assets and liabilities (continued)
3.1.3.1 Derivative financial instruments (continued)
Portfolio cash flow hedges
The Group applies macro cash flow hedge accounting to a portion of its floating rate financial assets and liabilities. The hedged
cash flows are a group of forecast transactions that result in cash flow variability from resetting of interest rates, reinvestment of
financial assets, or refinancing and rollovers of financial liabilities. This cash flow variability can arise on recognised assets or
liabilities or highly probable forecast transactions. The hedged items are designated as the gross asset or liability positions
allocated to time buckets based on projected repricing and interest profiles. The Group aims to maintain a position where the
principal amount of the hedged items is greater than or equal to the notional amount of the corresponding interest rate swaps
used as the hedging instruments. The hedge accounting relationship is reassessed on a monthly basis with the composition of
hedging instruments and hedged items changing frequently in line with the underlying risk exposures.
Portfolio fair value hedges
The Group applies macro fair value hedging to a portion of its fixed rate mortgages. The Group determines hedged items by
identifying portfolios of homogeneous loans based on their contractual maturity and other risk characteristics. Loans within the
identified portfolios are allocated to repricing time buckets based on expected, rather than contractual, repricing dates. The
hedging instruments are designated to those repricing time buckets. Hedge effectiveness is measured on a monthly basis, by
comparing fair value movements of the designated proportion of the bucketed loans due to the hedged risk against the fair value
movements of the derivatives.
The aggregated fair value changes in the hedged loans are recognised on the Group’s balance sheet as an asset. At the end of
every month, in order to minimise the ineffectiveness from early repayments and accommodate new exposures, the Group
voluntarily de-designates the hedge relationships and redesignates them as new hedges. Fair value hedging of fixed rate
deposits was discontinued in 2020, and the hedge adjustment recognised on the Group’s balance sheet is amortised to profit and
loss over the life of the hedged item.
Micro fair value hedges
The Group uses this hedging strategy on GBP, inflation or foreign currency denominated fixed rate assets held at FVOCI and
GBP and foreign currency denominated fixed rate debt issuances by the Group. Where assets and liabilities are exposed to
multiple risk components, for example interest rate and foreign currency risk, these components are simultaneously designated
as hedged risks within the same hedge relationship.
Hedge ineffectiveness
Hedge ineffectiveness can arise from:
•
mismatches between the contractual terms of the hedged item and hedging instrument, including basis differences;
•
differences in timing of cash flows of hedged items and hedging instruments;
•
changes in expected timings and amounts of forecast future cash flows; and
•
derivatives used as hedging instruments having a non-zero fair value at the time of designation.
Additionally, for portfolio fair value hedges of the Group’s fixed rate mortgage portfolio, ineffectiveness also arises from the
difference between forecast and actual repayments (i.e. prepayment risk).
The Group has no remaining hedge relationships exposed to LIBOR and as no uncertainty remains regarding interest rate
benchmark reform, the Group no longer applies the reliefs provided by ‘Interest Rate Benchmark Reform - Phase 1 and Phase 2
amendments’ to hedge accounting.
157
Notes to the consolidated financial statements (continued)
Section 3: Assets and liabilities (continued)
3.1.3.1 Derivative financial instruments (continued)
Summary of hedging instruments in designated hedge relationships
In the table below, the Group sets out the accumulated adjustments arising from the corresponding continuing hedge
relationships, irrespective of whether or not there has been a change in hedge designation during the 18 month period:
As at
31 Mar 2025
30 Sep 2023
Carrying amount
Carrying amount
Notional
contract
amount
£m
Assets
£m
Liabilities
£m
Change in fair
value of hedging
instrument in the
period used for
ineffectiveness
measurement(2)
£m
Notional
Contract
Amount
£m
Assets
£m
Liabilities
£m
Change in fair
value of hedging
Instrument in the
period used for
Ineffectiveness
measurement(2)
£m
Interest rate risk
Interest rate swaps(1)
28,014
311
138
(387)
51,185
1,295
545
(318)
Total derivatives designated as cash flow
hedges
28,014
311
138
(387)
51,185
1,295
545
(318)
FAIR VALUE HEDGES
Interest rate risk
Interest rate swaps(1)
26,886
526
132
(250)
17,683
983
257
(368)
Inflation and interest rate risk
Inflation linked interest rate swaps(1)
1,480
176
588
(41)
1,520
236
606
43
Foreign exchange and interest rate risk
Cross currency swaps
2,477
12
93
42
2,350
10
148
(58)
Total derivatives designated as fair value
hedges
30,843
714
813
(249)
21,553
1,229
1,011
(383)
(1)
As shown in the total derivatives contracts table on page 155, for centrally cleared derivatives, where the IAS 32 ‘Financial instruments: presentation’ netting
criteria is met, the derivative balances are offset within other assets. For all other derivatives, the derivative balances are presented within derivative financial
instruments.
(2)
Changes in fair value of cash flow hedging instruments are recognised in other comprehensive income. Changes in fair value of fair value hedging instruments
are recognised in the income statement in non-interest income.
158
Notes to the consolidated financial statements (continued)
Section 3: Assets and liabilities (continued)
3.1.3.1 Derivative financial instruments (continued)
Summary of hedged items in designated hedge relationships
In the table below, the Group sets out the accumulated adjustments arising from the corresponding continuing hedge
relationships, irrespective of whether or not there has been a change in hedge designation during the 18 month period.
31 Mar 2025
30 Sep 2023
As at
Change in fair
value of hedged
item in the period
used for
ineffectiveness
measurement
£m
Cash flow hedge reserve
Change in fair value
of hedged item in
the period used for
ineffectiveness
measurement
£m
Cash flow hedge reserve
Continuing
hedges
£m
Discontinued
hedges
£m
Continuing
hedges
£m
Discontinued
hedges
£m
CASH FLOW HEDGES
Interest rate risk
Gross floating rate assets and
gross floating rate liabilities(1)
367
144
89
268
625
59
Total
367
144
89
268
625
59
31 Mar 2025
30 Sep 2023
Carrying amount
of hedged items
Accumulated
hedge
adjustment on
the hedged
item
£m
Change in fair
value of
hedged items
in the period
used for
ineffectiveness
measurement
£m
Carrying amount
of hedged items
Accumulated
hedge
adjustment on
the hedged
item
£m
Change in fair
value of hedged
items in the
period used for
ineffectiveness
measurement
£m
Assets
£m
Liabilities
£m
Assets
£m
Liabilities
£m
FAIR VALUE HEDGES
Interest rate risk
Fixed rate mortgages(3)
20,404
-
(116)
302
10,864
-
(492)
426
Fixed rate FVOCI debt
instruments(4)
3,411
-
(464)
57
2,692
-
(568)
92
Fixed rate issuances(2)
-
(3,007)
64
(172)
-
(2,810)
234
(116)
Inflation and interest rate risk
Fixed rate FVOCI debt
instruments(4)
1,158
-
(86)
44
1,116
-
(92)
(43)
Foreign exchange and interest rate
risk
Fixed rate currency FVOCI debt
instruments(4)
-
-
-
2
64
-
(2)
1
Fixed rate currency issuances(2)
-
(2,411)
85
(58)
-
(2,156)
140
56
Total
24,973
(5,418)
(517)
175
14,736
(4,966)
(780)
416
(1)
Highly probable future cash flows arising from loans and advances to customers, due to customers and debt securities in issue.
(2)
Hedged item is recorded in debt securities in issue and related party transactions.
(3)
Hedged item and the cumulative fair value changes are recorded in loans and advances to customers.
(4)
Hedged item is recorded in financial assets at FVOCI.
159
Notes to the consolidated financial statements (continued)
Section 3: Assets and liabilities (continued)
3.1.3.1 Derivative financial instruments (continued)
31 Mar 2025
30 Sep 2023
As at
Hedge
ineffectiveness
recognised
in income
statement(1)
£m
Effective
portion
recognised
in other
comprehensive
income
£m
Reclassified into
income statement as
Hedge
ineffectiveness
recognised
in income
statement(1)
£m
Effective
portion
recognised
in other
comprehensive
income
£m
Reclassified into
income statement as
Net
interest
income
£m
Non-
interest
income
£m
Net
interest
income
£m
Non-interest
income
£m
CASH FLOW HEDGES
Interest rate risk
Gross floating rate assets and gross
floating rate liabilities
(20)
(367)
(1)
85
(50)
(268)
10
2
Total (losses)/gains on cash flow
hedges
(20)
(367)
(1)
85
(50)
(268)
10
2
Hedge ineffectiveness recognised in income
31 Mar 2025
£m
30 Sep 2023
£m
FAIR VALUE HEDGES
Interest rate risk
Fixed rate mortgages
(63)
31
Fixed rate FVOCI debt instruments
-
3
Fixed rate issuances
-
-
Inflation and interest rate risk
Fixed rate FVOCI debt instruments
3
-
Foreign exchange and interest rate risk
Fixed rate currency issuances
(14)
(1)
Total (gains)/losses on fair value hedges(1)
(74)
33
(1)
Recognised in gains less losses on financial assets at fair value.
160
Notes to the consolidated financial statements (continued)
Section 3: Assets and liabilities (continued)
3.1.4 Fair value of financial instruments
Accounting Policy
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the valuation date.
When available, the Group measures the fair value of a financial instrument using quoted prices in an active market for that
instrument. Where no such active market exists for the particular asset or liability, the Group uses a valuation technique to
arrive at the fair value, including the use of transaction prices obtained in recent arm's length transactions where possible,
discounted cash flow analysis, option pricing models and other valuation techniques commonly used by market participants. In
doing so, fair value is estimated using a valuation technique that makes maximum possible use of market inputs and that places
minimal possible reliance upon entity-specific inputs.
The best evidence of the fair value of a financial instrument at initial recognition is the transaction price, which represents the
fair value of the consideration paid or received, unless the fair value of that instrument is evidenced by comparison with other
observable current market transactions in the same instrument (i.e. without modification or repackaging) or based on a valuation
technique whose variables include only data from observable markets. When such evidence exists, the Group recognises
profits or losses on the transaction date.
In certain limited circumstances, the Group applies the fair value measurement option to financial assets including loans and
advances where the inherent market risks (principally interest rate and option risk) are individually hedged using appropriate
interest rate derivatives. The loan is designated as being carried at FVTPL to offset the movements in the fair value of the
derivative within the income statement and therefore avoid an accounting mismatch. When a loan is held at fair value, a
statistical-based calculation is used to estimate credit losses attributable to adverse movements in credit risk on the assets held.
This adjustment to the credit quality of the asset is then applied to the carrying amount of the loan to arrive at fair value and
recognised in the income statement.
Analysis of the fair value disclosures uses a hierarchy that reflects the significance of inputs used in measuring fair value. The
level in the fair value hierarchy within which a fair value measurement is categorised is determined on the basis of the lowest
level input that is significant to the fair value measurement in its entirety. The fair value measurement hierarchy is as follows:
•
Level 1 - quoted prices (unadjusted) in active markets for an identical financial asset or liability.
•
Level 2 - inputs other than quoted prices within Level 1 that are observable for the financial asset or liability, either
directly (as prices) or indirectly (derived from prices).
•
Level 3 - inputs for the financial asset or liability that are not based on observable market data (unobservable inputs).
For the purpose of reporting movements between levels of the fair value hierarchy, transfers are recognised at the beginning of
the reporting year in which they occur.
161
Notes to the consolidated financial statements (continued)
Section 3: Assets and liabilities (continued)
3.1.4 Fair value of financial instruments (continued)
(a)
Fair value of financial instruments recognised at amortised cost
The tables show a comparison of the carrying amounts of financial assets and liabilities measured at amortised cost, as
reported on the balance sheet, and their fair values, where these are not approximately equal.
There are various limitations inherent in this fair value disclosure, particularly where prices are derived from unobservable
inputs, due to some financial instruments not being traded in an active market. The methodologies and assumptions used in the
fair value estimates are therefore described in the notes to the tables. The difference between carrying value and fair value is
relevant in a trading environment but is not relevant to assets such as loans and advances.
31 Mar 2025
30 Sep 2023
Restated(1)
Restated(1)
Carrying value
Fair value
Carrying value
Fair value
Financial assets
£m
£m
£m
£m
Loans and advances to customers(2)
71,072
71,970
72,245
71,316
Financial liabilities
Customer deposits(3)
70,383
70,297
66,827
66,625
Debt securities in issue(4)
9,921
10,031
9,719
9,788
Due to other banks and similar institutions(3)
956
956
7,069
7,089
Due to related entities(3)
755
747
-
-
(1)
The prior year carrying values have been restated following the alignment of the Group’s accounting policies and presentation basis with Nationwide. Refer to
note 1.7 for further details. The fair values have also been updated in line with the carrying value adjustments.
(2)
Categorised as Level 3 in the fair value hierarchy with the exception of £995m (30 September 2023 (restated): £1,058m) of business overdrafts which are
categorised as Level 2.
(3)
Categorised as Level 2 in the fair value hierarchy.
(4)
Categorised as Level 2 in the fair value hierarchy with the exception of £4,445m of covered bonds (30 September 2023 (restated): £4,442m) which are
categorised as Level 1. The prior year has been restated following alignment of accounting policy with Nationwide where previously it was listed debt that
was categorised as Level 1.
The Group’s fair values disclosed for financial instruments at amortised cost are based on the following methodologies and
assumptions:
(a)
Loans and advances to customers - determined by firstly segregating them into portfolios which have similar
characteristics. Contractual cash flows are then adjusted for ECLs and expectations of customer behaviour based on
observed historic data. The cash flows are then discounted at a weighted average cost of capital (appropriate to the
portfolio) to arrive at an estimate of their fair value.
(b)
Customer deposits - determined using a replacement cost method which assumes alternative funding is raised in the most
advantageous market. The contractual cash flows have been discounted using a funding curve with credit spreads
reflecting the tenor of each deposit.
(c)
Debt securities in issue - taken directly from quoted market prices where available or determined from a discounted cash
flow model using current market rates for instruments of similar terms and maturity.
(d)
Due to other banks and similar institutions
determined from a discounted cash flow model using current market rates for
instruments of similar terms and maturity.
(e)
Due to related entities - derived from quoted market prices of the related debt security in issue after accounting for
differences in credit spread. All other amounts due from related entities are redeemable at call and therefore carrying value
approximates fair value.
162
Notes to the consolidated financial statements (continued)
Section 3: Assets and liabilities (continued)
3.1.4 Fair value of financial instruments (continued)
(b) Fair value of financial instruments recognised at fair value
The following tables provide an analysis of financial instruments that are measured subsequent to initial recognition at fair value,
using the fair value hierarchy described above.
As at
31 Mar 2025
30 Sep 2023
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
£m
£m
£m
£m
£m
£m
£m
£m
Financial assets
Held at FVOCI
6,197
-
-
6,197
6,184
-
-
6,184
Loans and advances to customers
-
47
-
47
-
59
-
59
Derivatives
-
42
6
48
-
135
-
135
Other
-
-
2
2
-
-
2
2
Total financial assets at fair value
6,197
89
8
6,294
6,184
194
2
6,380
Financial liabilities
Derivatives
-
132
-
132
-
290
-
290
Total financial liabilities at fair value
-
132
-
132
-
290
-
290
There were no transfers between Level 1 and 2 in the current or prior period.
The Group's valuations for financial instruments that are measured subsequent to initial recognition at fair value are based on
the following methodologies and assumptions:
(a) Held at FVOCI – based on quoted closing market prices.
(b) Loans and advances to customers – derived from data or valuation techniques based upon observable market data and
non-observable inputs as appropriate to the nature and type of the underlying instrument.
(c) Derivative financial assets and liabilities – includes foreign exchange contracts, interest rate swaps, interest rate and
currency option contracts, and currency swaps, and are obtained from discounted cash flow models or option pricing models
as appropriate. The level 3 derivative represents a share warrant over unlisted equity and is valued based upon the
expected surrender proceeds.
(d) Other – represents unlisted debt and equity investments for which the transaction price respectively is considered the best
representation of the exit price and is the Group’s best estimate of fair value.
Sensitivity of Level 3 fair value measurements to reasonably possible alternative assumptions
The Group has limited exposure to Level 3 fair value measurements. The warrant was subsequently settled post year end at the
carrying value and therefore there is no valuation uncertainty in respect of this instrument. If all risks inherent in the remaining
valuations were to crystallise in their entirety, total assets would reduce by £8m and lead to the immediate recognition of a loss
recognised in the income statement.
163
Notes to the consolidated financial statements (continued)
Section 3: Assets and liabilities (continued)
3.1.5 Securitisation and covered bond programmes
Accounting policy
The Group sponsors the formation of structured entities, primarily for the purpose of facilitation of asset securitisation and
covered bond transactions, the full details of which can be found in note 6.2 to the Company financial statements. The Group
has no shareholding in these entities, but is exposed, or has rights, to variable returns and has the ability to affect those returns.
The entities are consolidated in the Group’s financial statements in accordance with note 1.4.
Securitisation
The Group has securitised a portion of its retail mortgage loan portfolio under master trust securitisation programmes. The
securitised mortgage loans have been assigned at principal value to bankruptcy remote structured entities. The securitised debt
holders have no recourse to the Group other than the principal and interest (including fees) generated from the securitised
mortgage loan portfolio.
The externally held securitised notes in issue are included within debt securities in issue (note 3.1.1.4). There are a number of
notes held internally by the Group which are used as collateral for repurchases and similar transactions or for credit
enhancement purposes.
Covered bond
A subset of the Group's retail mortgage loan portfolio has been ring-fenced and assigned to a bankruptcy remote limited liability
partnership, Eagle Place Covered Bonds LLP, to provide a guarantee for the obligations payable on the covered bonds issued
by the Group.
The covered bond partnership is consolidated with the mortgage loans retained on the Group balance sheet and the covered
bonds issued included within debt securities in issue (note 3.1.1.4). The covered bond holders have dual recourse: firstly, to the
bond issuer on an unsecured basis; and secondly, to the LLP under the Covered Bond Guarantee secured against the
mortgage loans.
Under both the securitisation and covered bond programmes, the mortgage loans do not qualify for derecognition because the
Group remains exposed to the majority of the risks and rewards of the mortgage loan portfolio, principally the associated credit
risk. The Group continues to service the mortgage loans in return for an administration fee and is also entitled to any residual
income after all payment obligations due under the terms of the programmes and senior programme expenses have been met.
A deemed loan liability is recognised in the programme sponsor for the proceeds of the funding transaction.
Significant restrictions
Where the Group uses its financial assets to raise finance through securitisation and the sale of securities subject to repurchase
agreements, the assets become encumbered and are not available for transfer around the Group.
164
Notes to the consolidated financial statements (continued)
Section 3: Assets and liabilities (continued)
3.1.5 Securitisation and covered bond programmes (continued)
The assets and liabilities in relation to securitisation and covered bonds in issue at the period end are as follows (excluding
accrued interest):
Group
31 Mar 2025
30 Sep 2023
Loans and
advances
securitised
Notes in
issue
Loans and
advances
securitised
Notes in
issue
£m
£m
£m
£m
Securitisation programmes
Lanark
4,615
2,967
3,743
2,967
Lannraig
1,757
1,090
1,620
1,090
6,372
4,057
5,363
4,057
Less held by the Group
(1,922)
(2,328)
2,135
1,729
Covered bond programmes
Clydesdale Bank PLC (formerly Virgin Money PLC)
8,925
4,357
7,575
4,392
The fair values of financial assets and associated liabilities relating to the securitisation programmes were £6,459m and
£2,152m respectively (30 September 2023: £5,311m and £1,749m) where the counterparty to the liabilities has recourse only to
the financial assets.
There were no events during the period that resulted in any Group transferred financial assets being derecognised.
The Group has contractual and non-contractual arrangements which may require it to provide financial support as follows:
Securitisation programmes
The Group provides credit support to the structured entities via reserve funds, which are partly funded through subordinated
debt arrangements and by holding junior notes. Exposures are shown in the table below:
As at
31 Mar 2025
30 Sep 2023
£m
£m
Beneficial interest held
2,398
1,137
Subordinated loans
6
75
Junior notes held
638
853
3,042
2,065
Looking forward through future reporting years there are a number of date-based options on the notes issued by the structured
entities which could be actioned by them as issuer. These could require the Company, as sponsor, to provide additional liquidity
support.
Covered bond programme
The nominal level of over-collateralisation was £4,065m (30 September 2023: £2,670m) in the Clydesdale Bank PLC (formerly
Virgin Money PLC) programme. From time to time the obligations of the Group to provide over-collateralisation may increase
due to the formal requirements of the programme.
Under all programmes, the Group has an obligation to repurchase mortgage exposures if certain mortgage loans no longer
meet the programme criteria.
165
Notes to the consolidated financial statements (continued)
Section 3: Assets and liabilities (continued)
3.2 Intangible assets and goodwill
Capitalised
software
Goodwill
Customer
Relationship
Core
deposit
intangible
Total
£m
£m
£m
£m
£m
Cost
At 1 October 2022
1,060
11
-
6
1,077
Additions
11
-
-
-
11
Write-off
(45)
-
-
-
(45)
Disposal
(714)
-
-
-
(714)
At 30 September 2023
312
11
-
6
329
Additions
6
20
4
-
30
At 31 March 2025
318
31
4
6
359
Accumulated amortisation and
impairment
At 1 October 2022
804
-
-
6
810
Charge for the year
60
-
-
-
60
Disposal
(714)
-
-
-
(714)
At 30 September 2023
150
-
-
6
156
Charge for the period
76
-
-
-
76
At 31 March 2025
226
-
-
6
232
Net book value
At 31 March 2025
92
31
4
-
127
At 30 September 2023
162
11
-
-
173
All software additions form part of internally generated software projects.
On 2 April 2024 the Group acquired the remaining 50 per cent of the ordinary share capital of Virgin Money Unit Trust Managers
Limited (UTM), resulting in an increase to Goodwill of £20m and the acquisition of intangible assets relating to Customer
relationships of £4m. The goodwill arising from the acquisition primarily represents the potential for future new customer
acquisition and related asset under management growth following the adoption of the modern investment platform (note 5.6).
The UTM business is considered to be a separate cash generating unit (CGU) and goodwill is fully allocated to that CGU.
Goodwill and customer relationship intangibles recognised in the period have been tested for impairment at the period end. The
recoverable amount for the CGU as determined on a fair value less cost of disposal (FVLCD) basis was higher than the carrying
value and therefore no impairment charge has been recognised for the current period. FVLCD is calculated from in an income
based discounted cashflow using a five-year period with cashflows beyond that period extrapolated with a terminal growth rate
applied. The fair value measurement is categorised as level 3.
The following assumptions are used in the FVLCD calculation:
•
Discount rate: 12.7%
•
Projected terminal growth rate: 2%
Forecast cashflow projections include assumptions on growth in assets under management and associated margins derived
from a combination of past experience and market information on comparable businesses which are commercially sensitive.
Changes in the discount rate, projected terminal growth rate and asset under management growth assumptions will impact the
Group’s assessment of FVLCD, however reasonably possible negative changes in multiple of these variables would be required
simultaneously for the recoverable amount estimated to be reduced to equal the carrying amount.
166
Notes to the consolidated financial statements (continued)
Section 3: Assets and liabilities (continued)
3.3 Retirement benefit obligations
Accounting policy
Defined benefit pension scheme
A liability or asset is recognised on the balance sheet in respect of the defined benefit scheme and is measured as the
difference between the present value of the defined benefit obligation less the fair value of the defined benefit scheme assets at
the reporting date. The present value of the defined benefit obligation for the scheme is discounted by high-quality corporate
bond rates that have maturity dates approximating to the terms of the defined benefit obligation. Surpluses are only recognised
to the extent that they are recoverable through reduced contributions in the future or through refunds from the scheme. In
assessing whether a surplus is recoverable, the Group considers its current right to obtain a refund or a reduction in future
contributions and does not anticipate any future acts by other parties that could change the amount of the surplus that may
ultimately be recovered.
Pension expense attributable to the Group’s defined benefit scheme comprises current service cost, past service cost resulting
from a scheme amendment or curtailment, net interest on the net defined benefit obligation/asset, gains or losses on settlement
and administrative costs incurred. Where actuarial remeasurements arise, the Group recognises such amounts directly in equity
through the statement of comprehensive income in the period in which they occur. Actuarial remeasurements arise from
experience adjustments (the effects of differences between previous actuarial assumptions and what has actually occurred) and
changes in actuarial assumptions.
The Group’s principal trading subsidiary, Clydesdale Bank PLC, is the sponsoring employer of the Yorkshire and Clydesdale
Bank Pension Scheme, a defined benefit pension scheme, which was closed to future benefit accrual for the majority of current
employees on 1 August 2017.
The following table summarises the present value of the defined benefit obligation and fair value of plan assets for the Scheme
as at:
31 Mar 2025
30 Sep 2023
£m
£m
Active members' defined benefit obligation
(4)
(4)
Deferred members' defined benefit obligation
(1,004)
(988)
Pensioner and dependant members' defined benefit obligations
(1,228)
(1,292)
Total defined benefit obligation
(2,236)
(2,284)
Fair value of Scheme assets
2,593
2,796
Net defined benefit pension asset
357
512
Post-retirement medical benefits obligations(1)
(1)
(2)
(1)
Post-retirement medical benefits obligations are included within other liabilities (note 3.5).
The Group’s pension arrangements
The current version of the Scheme was established under trust on 30 September 2009 with the assets held in a Trustee
administered fund. The Trustee is responsible for the operation and governance of the Scheme, including making decisions
regarding the Scheme’s funding and investment strategy.
The Scheme is subject to the funding legislation outlined in the Pensions Act 2004 which came into force on 30 December
2005. This, together with documents issued by the Pensions Regulator, sets out the framework for funding defined benefit
occupational pension plans in the UK.
The Group has implemented several reforms to the Scheme to manage the obligation. It closed the Scheme to new members in
2004 and since April 2006 has provided benefits accruing on a career average revalued earnings basis. On 1 August 2017, the
Scheme was closed to future benefit accrual for the majority of current employees, with both affected and new employees’
future pension benefits being provided through the Group’s existing defined contribution scheme, ‘My Retirement’. The income
statement charge for this is included within pension costs in note 2.5.
The Group also provides post-retirement healthcare under a defined benefit scheme for some pensioners and their dependant
relatives for which provision has been made on a basis consistent with the methodology applied to the defined benefit pension
scheme. This is a closed scheme and the provision will be utilised over the life of the remaining scheme members. The
obligation in respect of this scheme was £1m at 31 March 2025 (30 September 2023: £2m) and is included within other liabilities
in note 3.5.
167
Notes to the consolidated financial statements (continued)
Section 3: Assets and liabilities (continued)
3.3 Retirement benefit obligations (continued)
Scheme valuations
There are a number of means of measuring liabilities in the defined benefit schemes, with the ultimate aim of the Trustee being
that the Scheme is 100% funded on an agreed self-sufficiency basis (which is where the Scheme is essentially self-funded and
does not need to call on the Group for any additional funding). The two bases used by the Group to value its obligations are: (i)
an IAS 19 accounting basis; and (ii) a Trustee’s Technical Provision basis.
(i)
IAS 19 accounting basis
The valuations of the Scheme assets and obligations are calculated on an accounting basis in accordance with the
applicable accounting standard IAS 19 which provides the basis for the accounting framework and methodology for entries in
the income statement, balance sheet and capital reporting. The principal purpose of this valuation is to allow comparison of
pension obligations between companies. The obligation under an accounting valuation can be higher or lower than those
under a Trustee’s Technical Provision valuation.
The rate used to discount the obligation on an IAS 19 basis is a key driver of any potential volatility and is based on yields on
AA rated high-quality corporate bonds, regardless of how the Trustee of the Scheme invests the assets. The accounting
valuation under IAS 19 can therefore move adversely because of low rates and narrowing credit spreads which are not fully
matched by the Scheme assets. Inflation is another key source of volatility and arises as a result of member benefits having
an element of index linking, which causes the obligation to increase in line with rises in long-term inflation assumptions. In
practice however, over the long term, the relationship between interest and inflation rates tends to be negatively correlated
resulting in a degree of risk offset.
(ii)
Trustee’s Technical Provision basis
This valuation basis reflects how much money the Trustee considers is required now in order to provide for the promised
benefits as they come up for payment in the future. The Trustee is responsible for ensuring that the calculation is conducted
prudently on an actuarial basis, considering factors including the Scheme’s investment strategy and the relative financial
strength of the sponsoring employer.
A key aspect of this valuation is the investment strategy the Trustee proposes to follow as part of the policy for meeting the
Scheme’s obligations. Because there are no guarantees about investment returns over long periods, legislation requires the
Trustee to consider carefully how much of their expected future investment returns it would be prudent for them to account
for in advance.
On 6 April 2023, the Scheme entered into a longevity swap transaction with Pacific Life Re International Limited and Zurich
Assurance Ltd to manage longevity risk in relation to c.£1.6bn of pensioner liabilities. The arrangement provides long term
protection to the Scheme against costs resulting from pensioners or their dependants living longer than currently expected,
enhancing security for Scheme members and reducing risk for the Group. The fair value of the hedge instrument at 31 March
2025 is a liability of £24m (30 September 2023: £Nil).
The latest formal triennial valuation for the Scheme was undertaken as at 30 September 2022 and reported a surplus of
£256m (previously a surplus of £144m based on Scheme data and market conditions as at 30 September 2019) and a
technical provision funding level of 109% (previously 103%). As the 2022 valuation outcome was a funding surplus, a deficit
recovery plan is not required and the Group is not required to make any additional contributions to the Scheme other than the
ongoing funding of the Scheme’s administrative expenses.
The next triennial valuation will be conducted in the year ending 30 September 2026 based on Scheme data and market
conditions as at 30 September 2025.
Scheme assets are not subject to the same valuation differences as Scheme obligations and are consistently valued at
current market value.
In June 2023, His Majesty’s High Court of Justice issued a ruling in respect of Virgin Media Limited versus NTL Pension
Trustees II Limited (and others) challenging the validity of rule amendments made to pension schemes contracted out on a
Reference Scheme Test basis between 6 April 1997 and 5 April 2016. On 25 July 2024, the Court of Appeal upheld the
original decision. The Group, independently of the Trustee, has assessed the possible impact on the scheme by reviewing a
sample of one material amendment from the relevant period. Uncertainties remain over the Group’s position in respect of
this, but the review did not indicate any specific concerns and therefore no adjustment was made to defined benefit
obligations.
168
Notes to the consolidated financial statements (continued)
Section 3: Assets and liabilities (continued)
3.3 Retirement benefit obligations (continued)
IAS 19 position
The Scheme movements in the period are as follows:
18 months to 31 March 2025
12 months to 30 September 2023
Present
value of
obligation
Fair value
of plan
assets
Total
Cumulative
impact in other
comprehensive
income
Present
value of
obligation
Fair value
of plan
assets
Total
Cumulative
impact in other
comprehensive
income
£m
£m
£m
£m
£m
£m
£m
£m
Balance sheet surplus at
1 October
(2,284)
2,796
512
(2,216)
3,216
1,000
(670)
(126)
(Charges)/credits
Interest (expense)/income
(186)
230
44
(117)
172
55
Administrative costs
-
(7)
(7)
-
(5)
(5)
Total (charge)/credit
recognised in the
consolidated income
statement
(186)
223
37
(117)
167
50
Remeasurements
Return on Scheme assets
less than discount rate
-
(253)
(253)
(253)
-
(470)
(470)
(470)
Actuarial:
Loss - experience
adjustments
(11)
-
(11)
(11)
(151)
-
(151)
(151)
Gain/(loss) - demographic
assumptions
1
-
1
1
(27)
-
(27)
(27)
Gain - financial assumptions
57
-
57
57
104
-
104
104
Remeasurement
gains/(losses) recognised
in other comprehensive
income
47
(253)
(206)
(206)
(74)
(470)
(544)
(544)
Contributions and
payments
Employer contributions
-
14
14
-
6
6
Disbursements
187
(187)
-
123
(123)
-
187
(173)
14
123
(117)
6
Balance sheet surplus
at 31 March/30 September
(2,236)
2,593
357
(2,284)
2,796
512
(876)
(670)
The expected contributions and benefit payments for the year ending 31 March 2026 are £6m (12 months to 30 September 2024:
£6m) and £123m (12 months to 30 September 2024: £115m) respectively.
The uncommitted facility of £75m granted by the Group in 2023 to replace the previous contingent security arrangement remains in
place. As at 31 March 2025 the amount drawn under the facility was £Nil (30 September 2023: £Nil).
169
Notes to the consolidated financial statements (continued)
Section 3: Assets and liabilities (continued)
3.3 Retirement benefit obligations (continued)
Scheme assets
In order to meet the obligations of the Scheme, the Trustee invests in a diverse portfolio of assets, with the level and volatility of
asset returns being a key factor in the overall investment strategy. The investment portfolio is subject also to a range of risks
typical of the types of assets held, such as: equity risk; credit risk on bonds; currency risk; interest rate and inflation risk; and
exposure to the property market. The Trustee’s investment strategy (including physical assets and derivatives) seeks to reduce
the Scheme’s exposure to these risks. In managing interest rate and inflation risks, the investment strategy seeks to hold
portfolios of matching assets (including derivatives) that enable the Scheme’s assets to better match movements in the value of
liabilities due to changes in interest rates and inflation.
As at 31 March 2025, the interest rate and inflation rate hedge ratios were 90% and 90% respectively (30 September 2023:
90% and 90%) of the obligation when measured on a solvency basis (30 September 2023: self-sufficiency basis). This strategy
reflects the Scheme’s obligation profile and the Trustee’s and the Group’s attitude to risk. The Trustee monitors the investment
objectives and asset allocation policy on a regular basis.
The Trustee’s investment strategy involves two main categories of investments:
•
Matching assets – a range of investments that provide a match to changes in obligation values.
•
Return seeking assets – a range of investments designed to provide specific, planned and consistent returns.
The major categories of plan assets for the Scheme, stated at fair value, are as follows:
31 March 2025
30 September 2023
Quoted
Unquoted
Total
Quoted
Unquoted
Total
£m
£m
£m
%
£m
£m
£m
%
Bonds
Government(1)
1,366
-
1,366
1,382
-
1,382
Corporate and other(2)
1,065
-
1,065
1,008
-
1,008
2,431
-
2,431
94%
2,390
-
2,390
85%
Other
Private equity investments(3)
-
307
307
-
352
352
Infrastructure(4)
-
220
220
-
238
238
Cash
-
118
118
-
122
122
Derivatives(5)
-
23
23
30
30
Repurchase agreements
-
(511)
(511)
-
(383)
(383)
Property
-
29
29
-
47
47
Longevity swaps
-
(24)
(24)
-
-
-
-
162
162
6%
-
406
406
15%
Total Scheme assets
2,431
162
2,593
100%
2,390
406
2,796
100%
(1)
Government includes both fixed and index-linked government bonds which were presented separately in the prior year.
(2)
Corporate and other includes global sovereign which was presented separately in the prior year.
(3)
Alternative credit investments are now described as private equity investments which aligns to the Nationwide line item description.
(4)
Renewables are now described as infrastructure which aligns to the Nationwide line item description.
(5)
Derivative financial instruments are used to modify the profile of the assets of the Scheme to better match the Scheme’s liabilities. Derivative holdings may
lead to increased or decreased exposures to the physical asset categories disclosed above.
The nature of the Scheme assets held has remained broadly consistent period on period.
At 31 March 2025, the Scheme had employer-related investments within the meaning of Section 40 (2) of the Pensions Act
1995 totalling £2m (30 September 2023: £1m).
170
Notes to the consolidated financial statements (continued)
Section 3: Assets and liabilities (continued)
3.3 Retirement benefit obligations (continued)
Actuarial assumptions
The following assumptions were used in arriving at the IAS 19 defined benefit obligation:
As at
31 Mar 2025
30 Sep 2023
% p.a.
% p.a.
Financial assumptions
Discount rate
5.70
5.65
Inflation (RPI)
3.05
3.30
Inflation (CPI)
2.40
2.70
Career average revalued earnings revaluations:
Pension increases (capped at 5% per annum)
2.95
3.15
Rate of increase for pensions in deferment
2.40
2.66
31 Mar 2025
30 Sep 2023
Years
Years
Demographic assumptions
Post retirement mortality:
Current pensioners at 60 - male
27.2
27.2
Current pensioners at 60 - female
29.5
29.4
Future pensioners at 60 - male(1)
28.8
28.3
Future pensioners at 60 - female(1)
31.0
30.4
(1)
The post retirement mortality assumptions for future pensioners at age 60 are based on a male and female member currently aged 40 (30 September 2023:
45).
Critical accounting estimates and judgements
The value of the Group’s defined benefit pension scheme requires management to make several assumptions. The key areas of
estimation uncertainty in these assumptions are:
•
Discount rate: this is set with reference to market yields at the end of the reporting period on high-quality corporate
bonds in the currency and with a term consistent with the Scheme’s obligations. The average duration of the Scheme’s
obligations is approximately 13 years. The market for bonds with a similar duration is illiquid and, as a result, significant
management judgement is required to determine an appropriate yield curve on which to base the discount rate;
•
Inflation: this is set with reference to market expectations of the RPI measure of inflation for a term consistent with the
Scheme’s obligations, based on data published by the BoE. Other measures of inflation (such as CPI, or inflation
measures subject to an annual cap) are derived from this assumption; and
•
Mortality: the cost of the benefits payable by the Scheme will also depend upon the life expectancy of the members.
The assumptions for mortality rates are based on standard mortality tables (as adjusted to reflect the characteristics of
Scheme members) which allow for future improvements in life expectancies.
The table below sets out the sensitivity and impact on the balance sheet surplus position of the Scheme, the defined benefit
obligation and pension cost to changes in the key actuarial assumptions:
Assumption change
Increase in defined benefit obligation
£m
1.0% decrease in discount rate
298
0.1% increase in inflation assumption
17
1 year increase in life expectancy
56
The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In
practice, changes in some of the assumptions may be correlated.
171
Notes to the consolidated financial statements (continued)
Section 3: Assets and liabilities (continued)
3.4 Other assets
As at
31 Mar 2025
30 Sep 2023
£m
£m
Restated(1)
Finance sub-leases
2
2
Investment in associates (note 6.2)
-
10
Other receivables
69
52
Other
10
6
81
70
(1)
The prior year has been restated following the alignment of the Group’s accounting policies and presentation basis with Nationwide. Refer to note 1.7 for further
details.
Other receivables include financial assets which are measured at amortised cost.
3.5 Other liabilities
As at
31 Mar 2025
30 Sep 2023
£m
£m
Restated(1)
Notes in circulation
1,429
1,675
Other
236
284
1,665
1,959
(1)
The prior year has been restated following the alignment of the Group’s accounting policies and presentation basis with Nationwide. Refer to note 1.7 for further
details.
Other liabilities include financial liabilities which are measured at amortised cost.
172
Notes to the consolidated financial statements (continued)
Section 3: Assets and liabilities (continued)
3.6 Lessee accounting
a)
Amounts recognised in the income statement
The income statement includes the following amounts related to leases:
18 months to
12 months to
31 Mar 2025
30 Sep 2023
£m
£m
Restated(1)
Interest expense and similar charges
Interest expense
(7)
(4)
Other operating income
Income from operating sub-leases where the Group is a lessor
1
1
Loss on revaluation of leased properties held at fair value
(2)
(5)
Operating and administrative expenses
Depreciation and impairment of right-of-use assets
(24)
(26)
Expense relating to short-term leases
(1)
(2)
Expense relating to leases of low-value assets that are not short-term leases
(1)
(1)
Amounts recognised in the income statement
(34)
(37)
(1)
The prior year has been restated following the alignment of the Group’s accounting policies and presentation basis with Nationwide. Refer to note 1.7 for further
details.
Total leasing cash outflow in the period was £41m (12 months to 30 September 2023: £27m).
b) Amounts recognised on the balance sheet
Right-of-use assets
18 months to
12 months to
31 Mar 2025
30 Sep 2023
£m
£m
Restated(1)
As at 1 October
153
113
Additions
2
76
Remeasurements
-
(9)
Disposals
-
(1)
Depreciation and impairment
(23)
(26)
As at 31 March/30 September
132
153
Of which:
Property, plant and equipment
102
115
Investment property
30
38
(1)
The prior year has been restated following the alignment of the Group’s accounting policies and presentation basis with Nationwide. Refer to note 1.7 for further
details. Following the alignment, £5m of depreciation and impairment has been reclassified to remeasurements.
An impairment charge of £6m has been recognised in the period (12 months to 30 September 2023: £10m) within operating and
administrative expenses following the annual impairment review of right-of-use assets.
173
Notes to the consolidated financial statements (continued)
Section 3: Assets and liabilities (continued)
3.6 Lessee accounting (continued)
Sub-leases
Future undiscounted minimum payments receivable in respect of sub-leased assets at the period ending were as follows:
As at
31 Mar 2025
30 Sep 2023
£m
£m
Operating leases
1
3
Finance leases
2
2
3
5
Lease liabilities
As at
31 Mar 2025
30 Sep 2023
£m
£m
Lease liabilities(1)
160
180
(1)
Lease liabilities are presented within other liabilities (note 3.5) on the balance sheet.
Future undiscounted minimum payments under lease liabilities at the period end were as follows:
As at
31 Mar 2025
30 Sep 2023
Amounts falling due
£m
£m
Within 1 year
15
22
Between 1 and 5 years
57
63
Over 5 years
129
142
201
227
c)
Lease commitments not recognised on the balance sheet
In addition to the lease liabilities recognised on the balance sheet, the Group also has lease commitments relating to leases
which have not yet commenced at the balance sheet date. Future undiscounted minimum payments on leases which are yet to
commence were as follows:
As at
31 Mar 2025
30 Sep 2023
Amounts falling due
£m
£m
Within 1 year
-
-
Between 1 and 5 years
-
1
Over 5 years
-
5
-
6
d) Leased investment property
Following the Nationwide acquisition, the valuation basis has changed from depreciated cost less impairment to fair value.
Following an independent valuation of investment property during the period, a £2m remeasurement charge was recognised
within other operating income (12 months to 30 September 2023: £5m).
174
Notes to the consolidated financial statements (continued)
Section 3: Assets and liabilities (continued)
3.7 Provisions for liabilities and charges
Employee
related costs
provision
Customer
related
provision
Property
provision
Off-balance
sheet ECL
provisions(1)
Total
£m
£m
£m
£m
£m
As at 1 October 2022
7
13
27
3
50
Charge to the income statement
7
-
24
2
33
Utilised
(6)
(3)
(5)
-
(14)
As at 30 September 2023
8
10
46
5
69
Charge/(credit) to the income statement
15
3
2
(1)
19
Utilised
(15)
(4)
(30)
-
(49)
As at 31 March 2025
8
9
18
4
39
(1)
The Group’s ECL accounting policy can be found in note 3.1.1.
Employee related costs provision
This includes provision for staff redundancies and for NIC on equity based compensation. During the period, provisions of £15m
(12 months to 30 September 2023: £7m) were raised relating to staff redundancy costs.
Customer related provision
This relates to customer matters, legal proceedings, and claims arising in the ordinary course of the Group’s business. A number of
these matters are now reaching a conclusion and the risk that the final amount required to settle the Group’s potential liabilities in
these matters being materially more than the remaining provision is now considered to be low. Following a review of the final
amounts required an additional £3m was raised during the period (12 months to 30 September 2023: £Nil).
Property provision
This includes costs for stores and office closures. During the period, provisions of £2m (12 months to 30 September 2023:
£24m) were raised.
The Group is also subject to enquiries from, and discussions with, its regulators and other government bodies, including tax
authorities, on a range of matters, and may be engaged in legal proceedings in the course of its business.
175
Notes to the consolidated financial statements (continued)
Section 4: Capital
4.1 Equity
4.1.1
Share capital and share premium
As at
31 Mar 2025
30 Sep 2023
£m
£m
Share capital
166
134
Share premium
775
9
Share capital and share premium
941
143
Group
31 Mar 2025
30 Sep 2023
31 Mar 2025
30 Sep 2023
Number of
shares
Number of
shares
£m
£m
Ordinary shares of £0.10 each – authorised,
allotted, called up and fully paid
Opening ordinary share capital
1,344,640,968
1,408,530,988
134
141
Issued under employee share schemes
2,053,416
3,947,282
-
-
Share buyback programme
(48,985,025)
(67,837,302)
(5)
(7)
Issued to immediate parent
366,972,478
-
37
-
Closing ordinary share capital
1,664,681,837
1,344,640,968
166
134
The holders of ordinary shares are entitled to dividends as declared from time to time and are entitled to one vote per share at
meetings of the shareholders of the Company. All shares in issue at 31 March 2025 rank equally with regard to the Company's
residual assets.
On 1 October 2024 the Company and Nationwide announced that all the conditions set out in the scheme of arrangement
announced on 21 March 2024 had been satisfied, or waived, and the scheme had become effective in accordance with its
terms. As a result, the Company was delisted from the London Stock Exchange and the Australian Securities Exchange and the
Company became a wholly owned subsidiary of Nationwide.
Ordinary share issuance
On 1 October 2024 the Company issued 298m ordinary shares to Nationwide for cash consideration of £650m (allocated as
share capital of £30m and share premium of £620m). Subsequently on 27 March 2025, the Company issued 69m ordinary
shares to Nationwide for cash consideration of £150m (allocated as share capital of £7m and share premium of £143m).
Dividends
The following dividends were declared in the current and prior periods:
•
A final dividend in respect of the year ended 30 September 2022 of 7.5p per ordinary share in the Company,
amounting to £103m, was paid in March 2023.
•
An interim dividend in respect of the year ended 30 September 2023 of 3.3p per ordinary share in the Company,
amounting to £45m, was paid in June 2023.
•
A final dividend in respect of the year ended 30 September 2023 of 2.0p per ordinary share in the Company,
amounting to £26m, was paid in March 2024.
•
An interim dividend in respect of the period ended 31 March 2025 of 2.0p per ordinary share in the Company,
amounting to £26m, was paid in July 2024.
Share buybacks
The Company engaged in the following share buybacks in the current and prior periods:
•
30 June 2022: an initial repurchase of up to £75m. The buyback commenced on 30 June 2022 and ended on 9
December 2022.
•
21 November 2022: an extension to the share buyback programme with an intent to repurchase a further £50m. The
buyback extension commenced on 21 November 2022 and ended on 7 March 2023.
•
2 August 2023: a new share buyback programme to repurchase £50m. The buyback commenced on 2 August 2023
and ended on 22 November 2023. Under this buyback programme, the Company returned £13m to shareholders in the
current period.
•
23 November 2023: a further share buyback to repurchase another £150m, ending no later than 16 May 2024. On 2
April 2024, the Company announced the full cancellation of the remaining programme following the publicised
proposed cash acquisition of the Group by Nationwide. Under this buyback programme, the Company returned £63m
to shareholders.
49m ordinary shares (30 September 2023: 68m), with a nominal value of £5m (30 September 2023: £7m), were repurchased
in the period for a total consideration of £76m (30 September 2023: £112m).
176
Notes to the consolidated financial statements (continued)
Section 4: Capital (continued)
4.1.1
Share capital and share premium (continued)
Each buyback was completed in aggregate between the Company’s ordinary shares of £0.10 each listed on the London Stock
Exchange and CDIs, each representing one share, listed on the Australian Securities Exchange. The Company repurchased
shares and CDIs in approximately equal proportions. All shares repurchased were cancelled and the nominal value of the share
cancellation transferred to the capital redemption reserve with the premium paid deducted from retained earnings.
Share premium represents the aggregate of all amounts that have ever been paid above par value to the Company when it has
issued ordinary shares.
A description of the other equity categories included within the statements of changes in equity, and significant movements
during the period, is provided below.
4.1.2
Other equity instruments
Other equity instruments comprises AT1 capital which consists of the following Perpetual Contingent Convertible Notes:
Group
31 Mar 2025
30 Sep 2023
Issuance date
Next reset date
Reset rate
£m
£m
9.25% AT1
13 March 2019
n/a
Benchmark gilts + 8.307%
-
250
8.25% AT1
17 June 2022
8 December 2027
Benchmark gilts + 6.357%
350
350
11.00% AT1
8 December 2023
8 June 2029
Benchmark gilts + 6.993%
350
-
700
600
Issuance costs
(7)
(6)
693
594
On 6 December 2023, perpetual securities (fixed 9.25% up to the first reset date) issued on 13 March 2019 totalling £105m
were redeemed. The remaining £142m were redeemed on the optional redemption date of 8 June 2024.
The issuances are treated as equity instruments in accordance with IAS 32 ‘Financial instruments: presentation’ with the
proceeds included in equity, net of transaction costs, which is the difference between the nominal and carrying values.
AT1 distributions of £100m were paid in the period (12 months ended 30 September 2023: £54m).
4.1.3
Capital reorganisation reserve
The capital reorganisation reserve of £839m was recognised on the issuance of the Company’s ordinary shares in February
2016 in exchange for the acquisition of the entire share capital of the Group’s previous parent company, CYB Investments
Limited (CYBI). The reserve reflects the difference between the consideration for the issuance of the Company’s shares and
CYBI’s share capital and share premium.
4.1.4
Merger reserve
A merger reserve of £633m was recognised on the issuance of the Company’s ordinary shares in February 2016 in exchange
for the acquisition of the entire share capital of CYBI. An additional £1,495m was recognised on the issuance of the Company’s
ordinary shares in October 2018 in exchange for the acquisition of the entire share capital of Virgin Money Holdings (UK)
Limited. The merger reserve reflects the difference between the consideration for the issuance of the Company’s shares and the
nominal value of the shares issued.
4.1.5
Other reserves
Own shares held
Virgin Money Holdings (UK) Limited established an EBT (the ‘VMH EBT’) in 2011 in connection with the operation of its share
plans. On the date of acquisition by the Company, the shares held in the VMH EBT were converted to the Company’s shares at
a ratio of 1.2125 Company shares for each Virgin Money Holdings (UK) Limited share. The investment in own shares as at 31
March 2025 is £Nil (30 September 2023: £0.3m). The market value of the shares held in the VMH EBT at 31 March 2025 was
£Nil (30 September 2023: £0.2m).
During the prior period, the Group established an EBT (the ‘VMUK EBT’) in connection with the operation of its share plans. The
investment in own shares as at 31 March 2025 was £Nil (30 September 2023: £2.0m). The market value of the shares held in
the VMUK EBT at 31 March 2025 was £Nil (30 September 2023: £1.9m).
The total investment in own shares as at 31 March 2025 was £Nil (30 September 2023: £2.3m). The total market value of the
shares held in both EBTs at 31 March 2025 was £Nil (30 September 2023: £2.1m).
177
Notes to the consolidated financial statements (continued)
Section 4: Capital (continued)
4.1.5
Other reserves (continued)
Capital redemption reserve
Under UK companies legislation, when shares are redeemed or purchased wholly or partly out of the company’s profits, the
amount by which the company’s issued share capital is diminished must be transferred to the capital redemption reserve. The
capital maintenance provisions of UK companies legislation apply to the capital redemption reserve as if it were part of the
company’s paid up share capital. The nominal value of the shares repurchased and cancelled under the buyback programmes
has been transferred to the capital redemption reserve.
Deferred shares reserve
The deferred shares reserve comprises shares to be issued in the future relating to employee share plans in regard to the
settlement of outstanding Virgin Money Holdings (UK) Limited share awards, which will be settled through the issuance of the
Company’s shares at a future date in line with the vesting profile of the underlying plans.
As part of the acquisition of the Company by Nationwide Building Society on 1 October 2024, some of the Virgin Money
Holdings (UK) Limited share awards were modified to become phantom awards linked to the value of Nationwide Building
Society Core Capital Deferred Shares (CCDS), to be paid in cash at the end of the deferral periods. As such, some of the
deferred shares reserve was released to retained earnings during the period.
When new shares are issued by the Company to settle the remaining awards, Nationwide Building Society will be required to
redeem the shares from the employees in cash at a fixed price of 218 pence per share at the end of the award deferral periods.
Equity based compensation reserve
The Group’s equity based compensation reserve records the value of equity settled share based payment benefits provided to
the Group’s employees as part of their remuneration that has been charged through the income statement and adjusted for
deferred tax.
During the period, all equity settled awards conditionally vested as a result of the change in control of the Group. For more
senior employees, while the awards conditionally vested, they are still deferred in line with regulatory requirements. When the
awards are settled through the issuance of the Company’s shares at the end of the deferral periods, the related equity based
compensation reserve amount will be released to retained earnings.
Nationwide will be required to redeem the shares from the employees in cash at a fixed price of 218 pence per share at the end
of the award deferral periods.
FVOCI reserve
The FVOCI reserve records the unrealised gains and losses arising from changes in the fair value of financial assets at FVOCI.
The movements in this reserve are detailed in the consolidated statement of comprehensive income.
Cash flow hedge reserve
The cash flow hedge reserve represents the effective portion of cumulative post-tax gains and losses on derivatives designated
as cash flow hedging instruments that will be recycled to the income statement when the hedged items affect profit or loss.
As at
31 Mar 2025
30 Sep 2023
£m
£m
At 1 October
496
699
Amounts recognised in other comprehensive income:
Cash flow hedge – interest rate risk
Effective portion of changes in fair value of interest rate swaps
(367)
(268)
Amounts transferred to the income statement
(84)
(12)
Taxation
125
77
At 31 March/30 September
170
496
Other hedging reserve
A new other hedging reserve was created as a result of adopting IFRS 9 ‘Financial Instruments’ – Hedge Accounting, effective
from 1 October 2024 as detailed in note 1.6. Under IFRS 9, the Group has chosen to exclude currency basis spreads from
hedge designation and instead report the change in fair value of these spreads directly within this reserve. The value of this
reserve at 31 March 2025 was a cumulative loss of £2m.
178
Notes to the consolidated financial statements (continued)
Section 4: Capital (continued)
4.2 Pillar 3 disclosures
UK Capital Requirements Regulation
Pillar 3 disclosure requirements are set out within the Disclosure (CRR) part of the PRA rulebook. The disclosures required
under the PRA framework are substantially equivalent to those required by Part Eight of the EU CRR. The consolidated
disclosures of Virgin Money UK PLC, for the 18-month period to 31 March 2025, will be issued concurrently with the Annual
Report and Accounts and can be found at www.virginmoneyukplc.com/investor-relations/results-and-reporting/annual-reports/
179
Notes to the consolidated financial statements (continued)
Section 5: Other notes
5.1 Contingent liabilities and commitments
Accounting policy
Financial guarantees
The Group provides guarantees in the normal course of business on behalf of its customers. Guarantees written are conditional
commitments issued by the Group to guarantee the performance of a customer to a third party and are primarily issued to
support direct financial obligations such as commercial bills or other debt instruments issued by a counterparty. The rating of the
Group as a guarantee provider enhances the marketability of the paper issued by the counterparty in these circumstances.
The ECL requirements as described in note 3.1.1 apply to loan commitments and financial guarantee contracts, with the ECL
allowance held as part of the provisions for liabilities and charges balance (note 3.7).
The table below sets out the amounts of financial guarantees and commitments which are not recorded on the balance sheet.
Financial guarantees and commitments are credit-related instruments which include acceptances, letters of credit, guarantees
and commitments to extend credit. The amounts do not represent the amounts at risk at the balance sheet date but the
amounts that would be at risk should the contracts be fully drawn upon and the customer default. Since a significant portion of
guarantees and commitments is expected to expire without being drawn upon, the total of the contract amounts is not
representative of future liquidity requirements.
As at
31 Mar 2025
30 Sep 2023
£m
£m
Financial guarantees
Guarantees:
Due in less than 3 months
12
12
Due between 3 months and 1 year
33
18
Due between 1 year and 3 years
15
8
Due between 3 years and 5 years
2
1
Due after 5 years
38
40
100
79
Other credit commitments
Undrawn formal standby facilities, credit lines and
other commitments to lend at call
19,003
17,921
Capital commitments
The Group had future capital expenditure which had been contracted for, but not provided for, at 31 March 2025 of £1.4m (30
September 2023: £0.1m).
Other contingent liabilities
Conduct risk related matters and legal claims
There continues to be uncertainty with judgement required in determining the quantum of conduct risk related liabilities, with
note 3.7 reflecting the Group’s current position where a provision can be reliably estimated. Until all matters are resolved the
final amount required to settle the Group’s potential liabilities for conduct related matters remains uncertain.
The Group will continue to reassess the adequacy of provisions for these matters and the assumptions underlying the
calculations at each reporting date based upon experience and other relevant factors at that time.
The Group’s subsidiary, Clydesdale Bank PLC, along with its former parent company, National Australia Bank Limited, was a
defendant in nine separate claims (comprising 904 individual claimants) co-ordinated by the claims management company,
RGL Management Limited, in connection with (i) the payment of break costs and (ii) the composition of fixed interest rates, both,
in respect of historic tailored business loans (‘RGL Litigation’). On 19 March 2024 the High Court of England and Wales
delivered its judgment in the first and fourth claims dismissing all claims made against Clydesdale Bank PLC and National
Australia Bank Limited. The Claimants appealed parts of the Judgement. The parties have settled the RGL Litigation and a
contingent liability no longer exists.
The Group is named in and is defending a number of other legal claims arising in the ordinary course of business. No material
adverse impact on the financial position of the Group is expected to arise from the ultimate resolution of these legal actions.
180
Notes to the consolidated financial statements (continued)
Section 5: Other notes (continued)
5.2 Equity based compensation
During the period, all equity settled awards conditionally vested as a result of the change in control of the Group (see note 1.1).
The PRA Remuneration Code deferral requirements will continue to be applied but all vesting terms of the awards no longer
apply.
For more senior colleagues, where awards are being deferred, approximately 50% of the awards were converted into a
phantom award linked to the value of the Nationwide Building Society CCDS, to be paid in cash at the end of the deferral
periods. There was no incremental fair value granted as a result of this modification. The other c.50% of awards remain over the
Company’s shares, which will be issued to colleagues at the end of the deferral periods but then immediately sold to
Nationwide, in line with the Company’s Articles which were amended as part of the acquisition.
As a result of the above, there has been accelerated recognition of the share based payment expense during the period to
reflect that the awards have conditionally vested.
For the 18-month period to 31 March 2025, the equity settled share based payment expense is £11m (12 months to 30
September 2023: £5m) and the cash settled share based payment expense is £10m (12 months to 30 September 2023: £Nil).
Equity settled awards during the period
The table below shows the equity settled awards during the period. Further detail of the Deferred Equity Plan (DEP) and the
Long Term Incentive Plan (LTIP), can be found in note 5.2 of the 2023 Annual Report and Accounts.
Awards/rights made during the period:
Plan
Number
outstanding
at 1 October
2023
Number
awarded
Number
forfeited
Number
released
Number
vested at
change of
control(1)(2)
Number
outstanding at
31 March 2025
Average fair
value at
grant date
pence
DEP
2018 Bonus
102,391
-
-
(34,129)
(68,262)
-
192.35p
2019 Bonus
60,772
-
-
(18,384)
(42,388)
-
174.50p
2019 Commencement
2,851
-
-
(2,851)
-
-
174.50p
2020 Commencement
3,692
-
-
(3,692)
-
-
135.40p
2021 Commencement
43,432
-
-
(31,519)
(11,913)
-
142.70p
2022 Bonus
179,490
-
-
(9,388)
(170,102)
-
176.75p
2023 Commencement
457,267
-
-
(46,043)
(411,224)
-
158.95p
2023 Bonus
-
982,806
-
(948,976)
(33,830)
-
148.90p
2024 Commencement
-
206,118
-
(63,229)
(142,889)
-
148.90p
LTIP
2017 LTIP
143,711
-
(26,425)
(35,926)
(81,360)
-
313.20p
2018 LTIP
1,380,220
-
(616,209)
-
(764,011)
-
190.47p
2019 LTIP
1,524,843
-
(23,730)
(475,472)
(1,025,641)
-
174.50p
2020 LTIP
8,084,761
-
(4,817,469)
(1,026,844)
(2,240,448)
-
135.40p
2021 LTIP
5,956,257
-
(4,294,145)
-
(1,662,112)
-
172.65p
2022 LTIP
6,900,152
-
(4,206,355)
-
(2,693,797)
-
176.75p
2023 LTIP
-
10,725,150
(7,597,223)
-
(3,127,927)
-
148.90p
(1)
The awards conditionally vested as a result of the change in control of the Group however some of the awards are still subject to the applicable PRA
Remuneration Code deferral requirements.
(2)
For senior colleagues where awards are being deferred, when the awards conditionally vested on the Court Sanction date, approximately 50% of the awards
were converted into a phantom award linked to the value of the Nationwide Building Society CCDS, to be paid in cash at the end of the deferral periods. A
cash settled share based payment liability is recognised for this (see below).
Determination of grant date fair values
Where awards were subject to only non-market performance conditions the grant date fair value of the awards has been taken
as the middle market share price value on the day immediately preceding the grant.
Where awards were subject to market performance conditions (2022 LTIP and 2023 LTIP), these are incorporated into the
calculation of grant date fair value using Monte Carlo simulation pricing models.
181
Notes to the consolidated financial statements (continued)
Section 5: Other notes (continued)
5.2 Equity based compensation
Cash settled share based payments during the period
A number of new cash settled share based payment awards were issued to colleagues during the period.
The table below shows the cash settled awards during the period:
Plan
Date of award
Method of settlement
Vesting conditions
Modification to DEP/LTIP
awards
Converted to
cash settled on
Court Sanction
Cash payment linked to
value of Nationwide CCDS
No vesting conditions apply however awards
are subject to deferral requirements
Transaction Retention Award
(TRA) plan
December 2024
Cash payment linked to
value of Nationwide CCDS
No vesting conditions apply however awards
are subject to deferral requirements
Annual Performance Pay
Deferral (APPD) plan
December 2024
Cash payment linked to
value of Nationwide CCDS
No vesting conditions apply however awards
are subject to deferral requirements
Long Term Incentive
Replacement Awards (LITRA)
December 2024
Cash payment linked to
value of Nationwide CCDS
Continuing employment or leaving
in certain limited circumstances
Long Term Performance Pay
(LTPP) plan
December 2024
Cash payment linked to
value of Nationwide CCDS
Continuing employment or leaving
in certain limited circumstances
and achievement of performance conditions
The carrying value of the share based payment liability in respect of the cash settled share based payment awards at 31 March
2025 is £Nil (30 September 2023: £Nil) for awards which have vesting conditions and £18m (30 September 2023: £Nil) for
awards where no vesting conditions apply however they are still subject to deferral requirements.
182
Notes to the consolidated financial statements (continued)
Section 5: Other notes (continued)
5.3 Related party transactions
The Group undertakes activity with the following entities which are considered to be related party transactions:
Transactions with parent company
During the period the Company issued medium-term notes of £754m (12 months to 30 September 2023: £Nil) to the Group’s
parent company, Nationwide. Interest charges of £6m (12 months to 30 September 2023: £Nil) were incurred relating to the
notes. Medium-term notes comprise dated, unsecured loans. These securities will, in the event of the winding-up of the issuer,
be subordinated to the claims of the depositors and all other creditors of the issuer, other than creditors whose claims rank
junior to the claims of the medium-term note liabilities, including those of subordinated debt holders. The amounts received is
employed in the general business of the Group. In addition, £1m of Nationwide recharges were incurred in the period of which
£1m was payable at 31 March 2025.
Yorkshire and Clydesdale Bank Pension Scheme
The Group provides banking services to the Scheme, with customer deposits of £12m (30 September 2023: £7m). Pension
contributions of £13m were made to the Scheme in the period (12 months to 30 September 2023: £7m).
The Group granted a £75m uncommitted liquidity facility to the Scheme as an additional contingency against future short-term
liquidity challenges resulting from unexpected market turbulence. There is also a £7m BACS facility held for the Scheme in
relation to payments to the Scheme’s members (30 September 2023: £7m). As at 31 March 2025, the amount drawn under both
facilities was £Nil (30 September 2023: £Nil).
JVs
As at 31 March 2025 the Group’s value of investments in JVs is £Nil (30 September 2023: £10m). The total share of losses
recognised in the period was £Nil (12 months to 30 September 2023: £Nil).
On 2 April 2024 the Group acquired the remaining c50% ordinary share capital of UTM, a JV with abrdn, for £20m. UTM is now
a wholly owned subsidiary. Prior to the acquisition date, the Group classed UTM as a JV accounted for under the equity
method. Transactions prior to the acquisition date are shown in note 5.6.
The only JV the Group is now a party to is Salary Finance and provides the JV with a revolving credit facility funding line, of
which the current gross lending balance was £211m (30 September 2023: £290m) and the undrawn facility was £39m (30
September 2023: £60m). Following a strategic review of Salary Finance, the JV will no longer be a core part of the go-forward
strategy of the Group. A combination of the JV’s historic trading losses and the decision to not extend any additional lending to
the JV beyond end 2025 meant that the lending met the conditions to be classed as Stage 3 (30 September 2023: Stage 2)
under IFRS 9. An ECL allowance of £45m (30 September 2023: £22m) is held with an impairment charge of £23m recognised
in the period (12 months to 30 September 2023: £3m). The lending continues to be held as part of the Group’s Consumer
lending portfolio and consists of personal lending to Salary Finance customers. The Group received £22m of interest income in
the period (12 months to 30 September 2023: £16m) and holds deposits of £12m (30 September 2023: £10m). During the
period the facility limit was reduced to £250m (30 September 2023: £350m) in line with the reduction in lending.
Other related party transactions with Virgin Group companies which were considered to be related party transactions
prior to the Nationwide acquisition(1)
The Group had the following related party transactions with other Virgin Group companies in the period prior to the Nationwide
acquisition:
•
License fees due to Virgin Enterprises for the use of the Virgin Money brand trademark resulted in expenses incurred of
£19m (12 months to 30 September 2023: £17m).
•
The Group incurs credit card commissions and air mile charges from Virgin Atlantic Airways Limited in respect of an
agreement between the two parties with expenses incurred of £19m (12 months to 30 September 2023: £17m).
•
The Group incurs charges and receives commissions concerning the cashback incentive scheme with Virgin Red
Limited in relation to the credit card, PCA and investment portfolio with expenses of £1.5m (12 months to 30 September
2023: £0.5m) and income of £1m (12 months to 30 September 2023: £0.4m) were recognised.
•
The Group has an arrangement with Virgin Start Up Limited to host a series of events, podcasts and videos and other
digital content with expenses of £0.3m (12 months to 30 September 2023: £0.4m) incurred.
•
The Group paid £8m (12 months to 30 September 2023: £20m) of ordinary dividends to Virgin Group Holdings Limited.
•
The Group provides lending facilities to other Virgin Group companies resulting in interest income of £1m (12 months to
30 September 2023: £0.2m).
(1)
All companies were incorporated in England and Wales with the exception of Virgin Group Holdings Limited, which was incorporated in the British Virgin
Islands.
183
Notes to the consolidated financial statements (continued)
Section 5: Other notes (continued)
5.3 Related party transactions (continued)
Charities
The Group provides banking services to The Virgin Money Foundation (‘the Foundation’) which has resulted in customer
deposits of £1m (30 September 2023: £1m). The Group has made donations of £2m in the period (12 months to 30 September
2023: £1m) to the Foundation to enable it to pursue its charitable objectives. The Group has also provided a number of support
services to the Foundation on a pro bono basis, including use of facilities and employee time. The estimated gift in kind for
support services provided during the period was £0.7m (12 months to 30 September 2023: £0.5m).
Compensation of key management personnel (KMP)
KMP comprises Directors of the Company and members of the Executive Committee.
18 months to
12 months to
31 Mar 2025
30 Sep 2023
£m
£m
Salaries and short-term benefits
20
9
Equity based compensation(1)
11
3
Termination benefits
1
-
32
12
(1)
The expense recognised in the period is in accordance with IFRS 2 ‘Equity based compensations’, both equity settled and cash settled, including associated
employers’ NIC. As set out in note 5.2, the share based payment expense was accelerated during the period to reflect that awards have conditionally vested.
Directors' emoluments
Total emoluments of all Directors for the period were £8m (12 months to 30 September 2023: £5m).
Total emoluments disclosed do not include the value of shares or share rights awarded under long term incentive schemes in
accordance with Schedule 5 paragraph 1(3)(a) of The Large and Medium-sized Companies and Groups (Accounts and
Reports) Regulations 2008.
None of the Directors were members of the Group's defined contribution or defined benefit pension schemes during the period
(12 months to 30 September 2023: none).
None of the Directors hold share options and none were exercised during the period (12 months to 30 September 2023: none).
Disclosures in respect of the highest paid Director
18 months to
12 months to
31 Mar 2025
30 Sep 2023
£m
£m
Aggregate remuneration(1)
4
2
(1)
Aggregate remuneration includes amounts paid for the period to 31 March 2025 and amounts received under the LTIPs in relation to the 2017, 2018, 2019
and 2020 LTIP awards.
The highest paid Director does not hold any share options.
Transactions with KMP
KMP, their close family members and any entities controlled or significantly influenced by the KMP have undertaken the
following transactions with the Group in the normal course of business. The transactions were made on the same terms and
conditions as applicable to other Group employees, or on normal commercial terms.
Transactions with KMP
As at
31 Mar 2025
30 Sep 2023
£m
£m
Loans and advances
1
1
Deposits
-
1
No provisions have been recognised in respect of loans provided to KMP (30 September 2023: £Nil). There were no debts
written off or forgiven during the period (12 months to 30 September 2023: £Nil). Included in the above is one (30 September
2023: five) loan totalling £0.5m (30 September 2023: £0.6m) made to Directors. In addition to the above, there are guarantees
of £Nil (30 September 2023: £Nil) made to Directors and their related parties.
184
Notes to the consolidated financial statements (continued)
Section 5: Other notes (continued)
5.4 Notes to the statement of cash flows
18 months to
12 months to
31 Mar 2025
30 Sep 2023
£m
£m
Restated(1)
Adjustments included in profit before tax
Interest payable
237
142
Depreciation, amortisation and impairment (note 2.5)
124
105
(Gains)/losses from derivatives and hedge accounting
4
12
Net increase on impairment losses on credit exposures (note 3.1.1.1)
124
158
Net (decrease)/increase on provisions for liabilities and charges
(31)
20
Equity based compensation (note 5.2)
21
5
Amortisation and losses on investment securities (including IFRS 3)
21
65
Costs recharged to parent
5
-
Net credit on retirement benefit obligations
(39)
(49)
Other non-cash movements
(54)
19
412
477
Changes in operating assets and liabilities
Balances with supervisory central banks
238
(142)
Net derivative financial instruments
(723)
(567)
Due from other banks and similar institutions
181
(1)
Loans and advances to customers
1,041
(203)
Defined benefit pension assets
(13)
(7)
Other assets
(77)
(1)
Due to other banks and similar institutions
(6,116)
(1,625)
Customer deposits
3,556
1,394
Debt securities in issue
339
823
Other liabilities
(50)
(228)
(1,624)
(557)
(1)
The prior year has been restated following the alignment of the Group’s accounting policies and presentation basis with Nationwide. Refer to note 1.7 for further
details.
For the purposes of the statement of cash flows, cash and cash equivalents comprise the following balances with less than
three months’ maturity from the date of acquisition. This includes cash and liquid assets and amounts due from other banks and
similar institutions (to the extent less than 90 days).
31 Mar 2025
30 Sep 2023
£m
£m
Restated(1)
Cash and balances with central banks (less mandatory deposits and
collateral)
10,034
10,196
Due from other banks and similar institutions (less than three months)
excluding collateral
270
399
10,304
10,595
(1)
The prior year has been restated following the alignment of the Group’s accounting policies and presentation basis with Nationwide. Refer to note 1.7 for further
details.
185
Notes to the consolidated financial statements (continued)
Section 5: Other notes (continued)
5.5 Segment information
The Executive Committee is responsible for allocating resources and assessing the performance of the business and is
therefore identified as the chief operating decision maker.
The Group has determined that it has one reportable segment as the Executive Committee reviews performance and makes
decisions based on the Group as whole. No segmental analysis is required on geographical lines as substantially all of the
Group’s activities are in the United Kingdom. As a result, no segmental disclosure is provided.
5.6 Virgin Money Unit Trust Managers Limited acquisition
On 2 April 2024 the Group acquired the remaining c50% of the ordinary share capital of UTM for cash consideration of £20m.
UTM provides investment management services to retail customers including general investment accounts, stocks and shares
ISAs and a pension product.
Prior to obtaining control, UTM was a JV with abrdn, with the Group holding a 50% plus one share equity interest which it
accounted for under the equity method. With UTM having successfully completed its technology platform migration and
launched the Virgin Money Investments digital platform, taking full ownership will enable the Group to focus on our expertise in
branding and distribution, while abrdn will continue to provide investment advisory services.
The goodwill of £20m arising from the acquisition primarily represents the potential for future new customer acquisition and
related asset under management growth following the adoption of the modern investment platform. None of the goodwill
recognised is expected to be deductible for income tax purposes.
The following tables summarise the consideration paid for UTM and the amounts of the identifiable assets acquired and
liabilities assumed recognised at the acquisition date.
£m
Consideration
Cash consideration transferred
20
Fair value of the Group’s equity interest in UTM held before the business combination
20
Consideration attributed to settlement of pre-existing relationships(1)
(7)
Total consideration
33
£m
Recognised amounts of identifiable assets acquired and liabilities assumed
Financial assets(2)
16
Other assets
2
Identifiable intangible assets
4
Total assets
22
Financial liabilities
-
Other liabilities
9
Total liabilities
9
Net assets
13
£m
Fair value of net assets acquired
13
Goodwill arising on acquisition
20
Total consideration
33
(1)
Pre-existing banking, debtor and creditor relationships between UTM and the Group were deemed to be settled at carrying value on acquisition with no
resulting gains or losses. These amounts are now eliminated on consolidation and therefore excluded from recognised assets acquired and liabilities assumed
with the deemed settlement value being deducted from total consideration.
(2)
Comprises cash and cash equivalents.
An £11m day 1 accounting gain was recognised on the pre-acquisition interest held in UTM following the acquisition of the
remaining c.50% of ordinary share capital and subsequent fair value remeasurement.
Goodwill and customer relationship intangibles recognised in the period have been tested for impairment at the period end with
no impairment charge recognised (note 3.2).
Revenue included in the Group’s consolidated statement of comprehensive income since 2 April 2024 contributed by UTM is
£23m (recognised within other operating income). UTM also contributed losses of £1m over the same period. Had UTM been
consolidated from 1 October 2023 the consolidated income statement would have included total revenue of £35m and losses of
£3m.
In the period prior to the acquisition the Group received £5m of recharge income (12 months to 30 September 2023: £9m) from
UTM in accordance with a service level agreement in respect of resourcing, infrastructure and marketing. The Group provided
UTM with a 30 day notice account with customer deposits of £10m at the time of acquisition (30 September 2023: £17m) which
resulted in interest of £0.3m being paid (12 months to 30 September 2023: £0.5m).
186
Notes to the consolidated financial statements (continued)
Section 5: Other notes (continued)
5.7 Post-balance sheet events
There have been no significant events between 31 March 2025 and the date of approval of the Annual Report and Accounts
which would require a change to or additional disclosure in the financial statements.
187
Company financial statements
Company balance sheet
As at
31 Mar 2025
30 Sep 2023
Note
£m
£m
Assets
Investments in controlled entities
6.2
4,906
4,016
Due from related entities
6.6
4,334
3,816
Due from other banks and similar institutions
7
6
Financial assets at FVTPL
1
1
Other assets
1
-
Total assets
9,249
7,839
Liabilities
Debt securities in issue
6.3
3,394
3,764
Due to related entities
6.6
756
7
Due to other banks and similar institutions
107
128
Other liabilities
143
6
Total liabilities
4,400
3,905
Equity
Share capital and share premium
4.1
941
143
Other equity instruments
6.5
693
594
Merger reserve
6.5
2,128
2,128
Other reserves
6.5
22
25
Retained earnings
6.5
1,065
1,044
Total equity
4,849
3,934
Total liabilities and equity
9,249
7,839
The Company made a profit of £230m (12 months to 30 September 2023: £292m) during the period.
The notes on pages 191 to 196 form an integral part of these financial statements.
188
Company financial statements
Company statement of changes in equity
Other reserves
Share
capital
and
share
premium
Other
equity
instruments
Merger
reserve
Own
shares
held
Capital
redemption
reserve
Deferred
shares
reserve
Equity
based
comp’
reserve
Retained
earnings
Total
equity
Note
£m
£m
£m
£m
£m
£m
£m
£m
As at 1 October 2022
148
666
2,128
-
3
11
10
1,056
4,022
Profit for the year
-
-
-
-
-
-
-
292
292
AT1 distributions paid
-
-
-
-
-
-
-
(54)
(54)
Dividends paid to ordinary shareholders
-
-
-
-
-
-
-
(148)
(148)
Ordinary shares issued
2
-
-
-
-
-
-
-
2
Share buyback
(7)
-
-
-
7
-
-
(112)
(112)
Purchase of own shares
-
-
-
(2)
-
-
-
-
(2)
Transfer from equity based compensation reserve
-
-
-
-
-
-
(4)
4
-
Equity based compensation expensed
-
-
-
-
-
-
5
-
5
Settlement of Virgin Money Holdings (UK) PLC share
awards
-
-
-
-
-
(5)
-
2
(3)
AT1 redemption
-
(72)
-
-
-
-
-
4
(68)
As at 30 September 2023
6.5
143
594
2,128
(2)
10
6
11
1,044
3,934
Profit for the period
-
-
-
-
-
-
-
230
230
AT1 distributions paid
-
-
-
-
-
-
-
(100)
(100)
Dividends paid to ordinary shareholders
-
-
-
-
-
-
-
(52)
(52)
Ordinary shares issued
803
-
-
-
-
-
-
-
803
Share buyback
(5)
-
-
-
5
-
-
(63)
(63)
Purchase of own shares
-
-
-
(11)
-
-
-
-
(11)
Sale of own shares to Nationwide on acquisition
-
-
-
5
-
-
-
2
7
Transfer from equity based compensation reserve
-
-
-
-
-
-
(10)
10
-
Equity based compensation expensed
-
-
-
-
-
-
7
-
7
Settlement of Virgin Money Holdings (UK) PLC share
awards
-
-
-
8
-
(5)
-
(5)
(2)
Acceleration of equity based compensation expense on
court sanction date
-
-
-
-
-
-
5
-
5
Impact of share schemes moving from equity settled to
cash settled on court sanction date
-
-
-
-
-
(1)
(6)
(1)
(8)
AT1 issuance
-
346
-
-
-
-
-
-
346
AT1 redemption
-
(247)
-
-
-
-
-
-
(247)
As at 31 March 2025
6.5
941
693
2,128
-
15
-
7
1,065
4,849
The notes on pages 191 to 196 form an integral part of these financial statements.
189
Company financial statements
Company statement of cash flows
For the period ended
18 months to
31 Mar 2025
12 months to
30 Sep 2023
£m
£m
Restated(1)
Operating activities
Profit on ordinary activities before tax
229
295
Adjustments for:
Non-cash included in profit before tax
Interest receivable
(251)
(144)
Interest payable
250
148
Costs recharged from subsidiary
50
4
Fair value movements on other financial assets at FVTPL
-
(1)
Changes in operating assets and operating liabilities(2)
Financial assets at FVTPL
-
6
Other assets
-
1
Net increase in amounts due from related entities
(391)
(311)
Due to other banks and similar institutions
(7)
(3)
Net (decrease)/increase in amounts due to related entities
(31)
1
Interest received
240
123
Tax (paid)/received – Group relief
(1)
2
Net cash provided by operating activities
88
121
Cash flows from investing activities
Investment in controlled entities
(897)
72
Net cash (used in)/provided by investing activities
(897)
72
Cash flows from financing activities
Interest paid on financing liabilities
(238)
(122)
Issuance of financing liabilities
641
743
Issuance of financing liabilities to parent company
748
-
AT1 issuance
347
-
Redemption of financing liabilities
(998)
(432)
Redemption of AT1 securities
(250)
(72)
Share buybacks
(88)
(112)
Issuance of ordinary shares
800
-
Disposal of own shares held
7
-
Ordinary dividends paid
(52)
(148)
AT1 distributions
(100)
(54)
Net cash provided by/(used in) financing activities
817
(197)
Net increase/(decrease) in cash and cash equivalents
8
(4)
Cash and cash equivalents at the beginning of the period
46
50
Cash and cash equivalents at the end of the period
54
46
(1)
Certain line items have been added, restated or combined following the alignment of the Group’s presentation with Nationwide. This had no impact on the total
cash and cash equivalents balances as originally reported at 30 September 2023.
(2)
In the original presentation for 30 September 2023, changes in operating assets and operating liabilities were disclosed separately under their respective headings.
These have now been combined under the one heading to align with the Nationwide presentation.
190
Company financial statements
Company statement of cash flows (continued)
Additional information on operational cash flows:
18 months to
12 months to
31 Mar 2025
30 Sep 2023
£m
£m
Dividends received
177
248
AT1 distributions received
100
54
For the purposes of the statement of cash flows, cash and cash equivalents comprise the following balances with less than
three months’ maturity from the date of acquisition.
31 Mar 2025
30 Sep 2023
£m
£m
Due from other banks and similar institutions
7
6
Due from related parties (note 6.6)
47
40
The amount included in due from other banks and similar institutions relates to the Company EBT.
Movements in liabilities arising from financing activities:
Debt
securities
in issue
Due to
related
entities
Total
£m
£m
£m
At 1 October 2022
3,459
-
3,459
Cash flows:
Issuances
744
-
744
Redemptions
(432)
-
(432)
Non-cash flows:
Movement in accrued interest
14
-
14
Unamortised costs
7
-
7
Other movements
(28)
-
(28)
At 30 September 2023
3,764
-
3,764
Cash flows:
Issuances
641
748
1,389
Redemptions
(998)
-
(998)
Non-cash flows:
Movement in accrued interest
(9)
6
(3)
Unamortised costs
10
-
10
Unrealised foreign exchange movements
(14)
-
(14)
At 31 March 2025
3,394
754
4,148
The notes on pages 191 to 196 form an integral part of these financial statements.
191
Company financial statements
Section 6: Notes to the Company financial statements
6.1 Company basis of preparation
The Company is incorporated in the UK and registered in England and Wales. The Company financial statements of Virgin
Money UK PLC, the parent company (the Company), which should be read in conjunction with the Group Directors’ report, have
been prepared on a going concern basis in accordance with UK adopted IAS. Following the acquisition of the Group by
Nationwide, the Company’s accounting reference date was changed from 30 September to 31 March in order to align to
Nationwide’s accounting reference date. The financial statements have therefore been prepared for the 18-month period ended
31 March 2025 meaning the amounts presented are not entirely comparable with those of the prior period.
No individual income statement or statement of comprehensive income is presented for the Company, as permitted by Section
408 of the Companies Act 2006.
Basis of measurement
The financial information has been prepared under the historical cost convention. The preparation of the financial statements in
accordance with UK adopted IASs requires management to make judgements, estimates and assumptions that affect the
application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ
from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimates are revised and in any future years affected.
The accounting policies of the Company are the same as those of the Group, which are set out in the notes to the consolidated
financial statements, except that the Company has no policy in respect of consolidation. These accounting policies have been
applied consistently to all periods presented in these financial statements.
6.2 Company investments in controlled entities
31 Mar 2025
30 Sep 2023
£m
£m
At period end
4,906
4,016
The increase in the period results from capital injections of £650m and £150m received from Nationwide in October 2024 and
March 2025 respectively, which was then subsequently invested in Clydesdale Bank PLC. On 1 October 2024, Clydesdale Bank
PLC issued 298m ordinary shares to the Company for cash consideration of £650m. Subsequently, on 27 March 2025,
Clydesdale Bank PLC issued 69m ordinary shares to the Company for cash consideration of £150m.
In addition, Clydesdale Bank issued a £350m AT1 instrument in December 2023, having redeemed a £250m AT1 instrument in
the period.
The remaining movement in the Company’s investment in Clydesdale Bank PLC relates to the Group’s historic Conduct
Indemnity arrangement with National Australia Bank (NAB). Claims under the Conduct Indemnity Deed have been made by the
Company in prior years, while the provisions in respect of the qualifying conduct costs and associated losses were raised and
incurred by Clydesdale Bank PLC. Under this arrangement, the Company has historically recovered the cost of relevant conduct
provisions raised by Clydesdale Bank PLC from NAB (minus a loss share borne by Clydesdale Bank PLC of 9.7%). Where
reimbursement income has been received from NAB, an amount equal to the tax relief on the qualifying conduct costs (less the
loss share of 9.7%) becomes repayable to NAB upon utilisation of that tax relief in a filed tax computation and saving an amount
of tax. For the Company, the substance of the indemnity agreement is that of variable consideration in relation to its investment
in Clydesdale Bank PLC. A liability for the repayment of these amounts is recognised. Changes in the value of the liability result
in a corresponding purchase price adjustment to the investment in Clydesdale Bank PLC.
The table below represents the wholly-owned subsidiary undertakings of the Group as at 31 March 2025. All entities have a 31
March accounting reference date.
Wholly-owned subsidiary
undertakings
Nature of
business
Class of
share held
Proportion
held
Country of
incorporation
Registered office
Direct holdings
Clydesdale Bank PLC
Banking
Ordinary
100%
Scotland
177 Bothwell Street,
Glasgow, G2 7ER
CYB Investments Limited
Lending
company
Ordinary
100%
England
Jubilee House, Gosforth,
Newcastle upon Tyne, NE3 4PL
Virgin Money Retirement
Savings Plan Trustee Limited
Dormant
Ordinary
100%
Scotland
177 Bothwell Street,
Glasgow, G2 7ER
YCBPS Property Nominee
Company Limited
Dormant
Ordinary
100%
England
Jubilee House, Gosforth,
Newcastle upon Tyne, NE3 4PL
Yorkshire and Clydesdale
Bank Pension Trustee Limited
Dormant
Ordinary
100%
Scotland
177 Bothwell Street,
Glasgow, G2 7ER
192
Company financial statements
Section 6: Notes to the Company financial statements (continued)
6.2 Company investments in controlled entities (continued)
Wholly-owned subsidiary
undertakings
Nature of
business
Class of
share held
Proportion
held
Country of
incorporation
Registered office
Indirect holdings
CGF No. 9 Limited
Leasing
Ordinary
100%
Scotland
177 Bothwell Street,
Glasgow, G2 7ER
Clydesdale Bank Asset
Finance Limited
Leasing
Ordinary
100%
Scotland
177 Bothwell Street,
Glasgow, G2 7ER
CYB Intermediaries Limited
Insurance
intermediary
Ordinary
100%
England
Jubilee House, Gosforth,
Newcastle upon Tyne, NE3 4PL
St Vincent (Equities) Limited
Investment
company
Ordinary
100%
Scotland
177 Bothwell Street,
Glasgow, G2 7ER
Virgin Money Holdings (UK)
Limited
Intermediate
holding
company
Ordinary
100%
England
Jubilee House, Gosforth,
Newcastle upon Tyne, NE3 4PL
Virgin Money Limited
Non-trading
company
Ordinary
100%
England
Jubilee House, Gosforth,
Newcastle upon Tyne, NE3 4PL
Virgin Money Personal
Financial Service Limited
Insurance
intermediary
Ordinary
100%
England
Jubilee House, Gosforth,
Newcastle upon Tyne, NE3 4PL
Virgin Money Unit Trust
Managers Limited
Financial
intermediary
Ordinary
100%
England
Jubilee House, Gosforth,
Newcastle upon Tyne, NE3 4PL
Yorkshire Bank Home Loans
Limited
Mortgage
finance
Ordinary
100%
England
Jubilee House, Gosforth,
Newcastle upon Tyne, NE3 4PL
C.B. Nominees Limited
Dormant
Limited by
guarantee
100%
Scotland
177 Bothwell Street,
Glasgow, G2 7ER
CYB SSP Trustee Limited
Dormant
Ordinary
100%
England
Jubilee House, Gosforth,
Newcastle upon Tyne, NE3 4PL
Virgin Money Giving Limited
Dormant
Ordinary
100%
England
Jubilee House, Gosforth,
Newcastle upon Tyne, NE3 4PL
Virgin Money Nominees
Limited
Dormant
Ordinary
100%
England
Jubilee House, Gosforth,
Newcastle upon Tyne, NE3 4PL
Virgin Money Trustee Limited
Dormant
Ordinary
100%
England
Jubilee House, Gosforth,
Newcastle upon Tyne, NE3 4PL
Yorkshire Bank Limited
Dormant
Ordinary
100%
England
Jubilee House, Gosforth,
Newcastle upon Tyne, NE3 4PL
Impairment of investment in Clydesdale Bank PLC
An impairment test on the carrying value of the Company’s investment in Clydesdale Bank PLC has been undertaken. The
recoverable amount as determined by a value-in-use (VIU) calculation was higher than the carrying value and therefore no
impairment charge has been recognised for the current period (12 months to 30 September 2023: £Nil).
Key assumptions used in value-in-use calculation
The VIU calculation uses discounted cash flow projections based on the Board approved 5-year Strategic and Financial Plan.
The following assumptions are used in the VIU calculation, in accordance with the requirements of IAS 36:
• Pre-tax discount rate: 12.7% (30 September 2023: 16.7%)
• Projected terminal growth rate: 2% (30 September 2023: 2%)
The five year forecast projections encompass a range of economic indications such as GDP growth, unemployment statistics as
well as a range of other business assumptions specific to the Group such as asset volumes, product volumes and margins
which are commercially sensitive.
193
Company financial statements
Section 6: Notes to the Company financial statements (continued)
6.2 Company investments in controlled entities (continued)
Sensitivity to changes in assumptions
Changes in the discount rate or projected terminal growth rate will impact the Company’s assessment of the VIU of Clydesdale
Bank PLC. If adjusted independently of all other variables, a 10 basis point increase in the discount rate would decrease the
headroom by £68m and a 10 basis point decrease in the projected terminal growth rate would decrease the headroom by £51m.
Interest in charitable foundations
The Group has an interest in The Virgin Money Foundation, a charitable foundation registered in England as a company limited
by guarantee. Clydesdale Bank PLC acts as a guarantor for £1 and is also a donor.
The Company also has an interest in a number of structured entities. All entities have a 31 March accounting reference date:
Other controlled entities
as at 31 March 2025
Nature of business
Country of
incorporation
Registered office
Eagle Place Covered Bonds LLP
Acquisition of mortgage
loans
England
Jubilee House, Gosforth,
Newcastle upon Tyne, NE3 4PL
Gosforth Funding 2017-1 PLC (in
liquidation)
Issuer of securitised notes
England
10 Fleet Place, London, EC4M 7RB
Gosforth Holdings 2017-1 Limited (in
liquidation)
Holding company
England
10 Fleet Place, London, EC4M 7RB
Lanark Funding Limited
Funding company
England
Suite 2, Seventh Floor, 50 Broadway,
London, SW1H 0DB
Lanark Holdings Limited
Holding company
England
Suite 2, Seventh Floor, 50 Broadway,
London, SW1H 0DB
Lanark Master Issuer PLC
Issuer of securitised notes
England
Suite 2, Seventh Floor, 50 Broadway,
London, SW1H 0DB
Lanark Trustees Limited
Mortgages trustee
England
Suite 2, Seventh Floor, 50 Broadway,
London, SW1H 0DB
Lannraig Funding Limited
Funding company
England
1 Bartholomew Lane,
London, EC2N 2AX
Lannraig Holdings Limited
Holding company
England
1 Bartholomew Lane,
London, EC2N 2AX
Lannraig Master Issuer PLC
Issuer of securitised notes
England
1 Bartholomew Lane,
London, EC2N 2AX
Lannraig Trustees Limited
Mortgages trustee
Jersey
44 Esplanade, St Helier,
Jersey, JE4 9WG Channel Islands
Details of the Group's interests in consolidated structured entities associated with securitisation and covered bond
arrangements are set out in note 3.1.5.
The Group also has a participating interest in the following undertakings as either an associate (A) or a joint venture (JV):
Name of undertaking
Status
% of share class held by
immediate parent company
(or by the Group where this
varies)
Registered office address and
principal place of business
Financial year
end
Eagle Place Covered Bonds
Finance Limited(1)
A
20%
1 Bartholomew Lane, London,
EC2N 2AX
31 December
Salary Finance Loans Limited
JV
50%
Scale Space, 58 Wood Lane,
London, W12 7RZ
31 December
(1)
Eagle Place Covered Bonds Finance Limited is a dormant company within the Group’s covered bond programme.
Investments in JVs are recognised in the consolidated financial statements within other assets and accounted for using the
equity method.
Further detail on the JV arrangement is provided in note 5.3.
194
Company financial statements
Section 6: Notes to the Company financial statements (continued)
6.3 Company debt securities in issue
31 Mar 2025
30 Sep 2023
£m
£m
Medium-term notes
2,612
2,728
Subordinated debt
782
1,036
3,394
3,764
Information on subordinated debt and medium-term notes is provided in note 3.1.1.4 to the consolidated financial statements.
Hedge accounting is not applicable to the debt securities in issue at the Company level.
6.4 Company fair value of financial instruments
The accounting policy for fair value of financial instruments is provided in note 3.1.4 to the consolidated financial statements.
The table below shows a comparison of the carrying amounts of financial assets and liabilities as reported on the balance sheet
and their fair values where these are not approximately equal.
There are various limitations inherent in this fair value disclosure as not all of the Company’s financial instruments can be
exchanged in an active trading market.
31 Mar 2025
30 Sep 2023
Carrying
value
£m
Fair
value
£m
Fair value measurement
using:
Carrying
value
£m
Fair
value
£m
Fair value measurement using:
Level 1
£m
Level 2
£m
Level 3
£m
Level 1
£m
Level 2
£m
Level 3
£m
Financial assets
Due from related entities
4,334
4,385
-
4,385
-
3,816
3,699
-
3,699
-
Other financial assets at
FVTPL
1
-
-
-
1
1
1
-
-
1
Financial liabilities
Debt securities in issue
3,394
3,434
-
3,434
-
3,764
3,597
-
3,597
-
Due to related entities
756
747
-
747
-
-
-
-
-
-
195
Company financial statements
Section 6: Notes to the Company financial statements (continued)
6.4 Company fair value of financial instruments (continued)
Notes
The Company’s fair values disclosed for financial instruments are based on the following methodologies and assumptions:
Due from related entities – derived from quoted market prices of the debt security in issue after accounting for differences in
credit spread. All other amounts due from related entities are redeemable at call and therefore carrying value approximates fair
value.
Other financial assets at FVTPL (Level 3) – the Company holds £1m (30 September 2023: £1m) of debt investments measured
at FVTPL. These investments are categorised as Level 3, as the valuations incorporate significant unobservable inputs.
Valuation is based on the transaction price which the Company believes is the best representation of an exit price. The
significant unobservable input is the recoverable amount which could range from 0 to 100%.
Debt securities in issue – taken directly from quoted market prices. The prior year fair value has been reclassified to Level 2, to
better reflect the valuation approach, consistent with the current year presentation.
Due to related entities - derived from quoted market prices of the related debt security in issue after accounting for differences
in credit spread. All other amounts due from related entities are redeemable at call and therefore carrying value approximates
fair value.
6.5 Company reserves
6.5.1 Other equity instruments and reserves
Information on other equity instruments and other reserves is provided in note 4.1 to the Group’s consolidated financial
statements.
6.5.2 Available distributable items
Distributable reserves are determined as required by the Companies Act 2006 by reference to a company’s individual financial
statements. At 31 March 2025, the Company had accumulated distributable reserves of £1,065m (30 September 2023:
£1,044m).
6.6 Company related party transactions
During the period there have been transactions between the Company, controlled entities of the Company, and other related
parties. The Company receives and provides a range of services from/to its principal subsidiary undertaking, Clydesdale Bank
PLC, including loans and deposits.
Amounts due from related entities
31 Mar 2025
£m
30 Sep 2023
£m
Bank accounts held with controlled entity of the Company
47
40
Medium-term notes
3,367
2,735
Subordinated debt
782
1,036
Other receivables
138
5
Total amounts due from related entities
4,334
3,816
Interest income on the above amount was as follows:
Interest income from related parties
251
144
These are all classified as amortised cost and, for IFRS 9 purposes, are held under Stage 1. The impact of the ECL
requirements on these financial assets is immaterial.
196
Company financial statements
Section 6: Notes to the Company financial statements (continued)
6.6 Company related party transactions (continued)
Amounts due to related entities
31 Mar 2025
£m
30 Sep 2023
£m
Medium term notes
754
-
Other payables
2
7
Total amounts due to related entities
756
7
Medium-term notes comprise dated, unsecured loans issued by the Company. These securities will, in the event of the winding-
up of the issuer, be subordinated to the claims of depositors and all other creditors of the issuer, other than creditors whose
claims rank junior to the claims of the holders of the medium-term note liabilities, including those of subordinated debt holders.
Other transactions with related entities
31 Mar 2025
£m
30 Sep 2023
£m
Non-interest income received
306
21
Dividends received
183
248
AT1 distributions received
100
54
589
323
Interest expense
6
-
Other expense
6
4
12
4
Other related party transactions
As detailed in note 5.2 to the consolidated financial statements, the Group provides share based compensation to employees
through a number of schemes, all in relation to shares in the Company. The cost of providing these benefits is recharged to the
employing company, Clydesdale Bank PLC. Recharges are calculated based on the fair value of awards expensed in the period
in accordance with IFRS 2 ‘Share based payments’. The key management personnel of the Company are the key management
personnel of the Group, with relevant disclosures given in note 5.3 to the consolidated financial statements. The Company has
no employees (30 September 2023: Nil).
Other related party transactions with Virgin Group companies which were considered to be related party transactions
prior to the Nationwide acquisition(1)
•
Licence fees due to Virgin Enterprises Limited for the use of the Virgin Money brand trademark resulted in expenses
incurred of £19m (12 months to 30 September 2023: £17m).
•
The Company paid £8m (12 months to 30 September 2023: £20m) of ordinary dividends to Virgin Group Holdings
Limited.
(1)
Virgin Enterprises Limited is incorporated in England and Wales, with Virgin Group Holdings Limited incorporated in the British Virgin Islands.
197
Measuring financial performance - glossary
Financial performance measures
As highlighted in the Strategic report and the Risk report, the Group utilises a range of asset quality and regulatory ratios to
assess the Group’s performance. Descriptions of the ratios are set out below:
Asset quality:
Term
Definition
Impairment charge to
average customer loans
(cost of risk)
Impairment losses on credit exposures plus credit risk adjustment on fair value loans to average
customer loans (defined as loans and advances to customers, other financial assets at fair value
and due from customers on acceptances).
Loans in Stage 2
Stage 2 loans as a percentage of total gross loans and advances.
Loans in Stage 3
Stage 3 loans as a percentage of total gross loans and advances.
Total book coverage
Total impairment provision on credit exposures as a percentage of total gross loans and advances.
Stage 2 coverage
Stage 2 impairment provisions as a percentage of Stage 2 gross loans and advances.
Stage 3 coverage
Stage 3 impairment provisions as a percentage of Stage 3 gross loans and advances.
Regulatory ratios:
Term
Definition
Common Equity Tier 1
(CET1) ratio
CET1 capital divided by RWAs at a given date.
Tier 1 ratio
Tier 1 capital as a percentage of RWAs.
Total capital ratio
Total capital resources divided by RWAs at a given date.
UK leverage ratio
The Group’s leverage ratio on a modified basis, excluding qualifying central bank claims from the
exposure measure in accordance with the policy statement issued by the PRA in October 2017.
Liquidity coverage ratio
(LCR)
Measures the surplus (or deficit) of the Bank’s high-quality liquid assets relative to weighted net
stressed cash outflows over a 30 day period. It assesses whether the Bank has sufficient liquid
assets to withstand a short-term liquidity stress based on cash outflow assumptions provided by
regulators.
Minimum requirement
for own funds and
eligible liabilities
(MREL) ratio
Total capital resources less ineligible AT1 and Tier 2 instruments at the period end plus senior
unsecured securities issued with greater than one year to maturity at the period end divided by
RWAs at the period end.
Net stable funding ratio
(NSFR)
The total amount of available stable funding divided by the total amount of required stable funding,
expressed as a percentage. The Group monitors the NSFR based on its own interpretations of
current guidance available for CRD V NSFR reporting. Therefore, the reported NSFR may change
over time with regulatory developments. Due to possible differences in interpretation of the rules,
the Group’s ratio may not be directly comparable with those of other financial institutions.
198
Main Glossary
Term
Definition
Additional Tier 1 (AT1)
Securities that are considered AT1 capital in the context of CRD V.
arrears
A customer is in arrears (or in a state of delinquency) when they fail to adhere to their contractual
payment obligations resulting in an outstanding loan that is unpaid or overdue. When a customer is
in arrears, the total outstanding loans on which payments are overdue are said to be delinquent.
Bank
Clydesdale Bank PLC.
Basel II
The capital adequacy framework issued by the Basel Committee on Banking Supervision (BCBS) in
June 2004.
Basel III
Reforms issued by the BCBS in December 2017 with subsequent revision.
Basel 3.1
An updated version of the Basel III reforms of the regulatory framework issued by the BCBS in
December 2017. These are being implemented in the UK by the PRA from 1 January 2027.
basis points (bps)
One hundredth of a percent (0.01%); meaning that 100 bps is equal to 1%. This term is commonly
used in describing interest rate movements.
Board
Refers to the Virgin Money UK PLC Board or the Clydesdale Bank PLC Board as appropriate.
Business lending
Lending to non-retail customers, including overdrafts, asset and lease financing, term lending, bill
acceptances, foreign currency loans, international and trade finance, securitisation and specialised
finance.
carrying value (also referred to as
carrying amount)
The value of an asset or a liability in the balance sheet based on either amortised cost or fair value
principles.
Code
The 2018 UK Corporate Governance Code
collateral
The assets of a borrower that are used as security against a loan facility.
Common Equity Tier 1 capital
(CET1)
The highest quality form of regulatory capital that comprises total shareholders’ equity and related
non-controlling interests, less goodwill and intangible assets and certain other regulatory
adjustments.
Company
Virgin Money UK PLC.
counterparty
The other party that participates in a financial transaction, with every transaction requiring a
counterparty in order for the transaction to complete.
coverage ratio
Impairment allowance as at the period end shown as a percentage of gross loans and advances as
at the 18 month period end.
covered bonds
A corporate bond with primary recourse to the institution and secondary recourse to a pool of assets
that act as security for the bonds on issuer default. Covered bonds remain on the issuer’s balance
sheet and are a source of term funding for the Group.
CRD IV
Capital Requirements Directive (EU) 2013/36 revised by Directive (EU) 2019/878, as implemented
in the UK by PRA Policy Statement 22/21 and incorporated into the PRA Rulebook from 1 January
2022.
CRD V
The supervisory framework which covers prudential rules for banks, building societies and
investment firms in the UK.
credit conversion factor (CCF)
CCFs are used in determining the EAD in relation to a credit risk exposure. The CCF is an estimate
of the proportion of undrawn and off-balance sheet commitments expected to be drawn down at the
point of default.
Credit impaired financial asset
A financial asset that is in default or has an individually assessed provision. This is also referred to
as a ‘Stage 3’ impairment loss and subject to a lifetime ECL calculation. The Group considers 90
DPD as a backstop in determining whether a financial asset is credit impaired.
Credit risk mitigation
Techniques to reduce the potential loss in the event that a customer (borrower or counterparty)
becomes unable to meet its obligations. This may include the taking of financial or physical security,
the assignment of receivables or the use of credit derivatives, guarantees, credit insurance, set-off
or netting.
CRR
Capital Requirements Regulation (EU) 575/2013, revised by Regulation (EU) 2019/876, as
implemented in the UK by PRA Policy Statement 22/21 and incorporated into the PRA Rulebook
from 1 January 2022.
customer deposits
Money deposited by individuals and corporate entities that are not credit institutions, and can be
either interest bearing, non-interest bearing or term deposits.
days past due (DPD)
The number of days a facility has borrowing in excess of an agreed or expired limit or, where
facilities are subject to a regular repayment schedule, contractual payments are not fully up to
date.
default
A customer is in default when either they are more than 90 DPD on a credit obligation to the
Group, or are considered unlikely to pay their credit obligations in full without recourse to actions
such as realisation of security (if held).
199
Main Glossary (continued)
delinquency
See ‘arrears’
Demerger
The demerger of the Group from NAB which took effect on 8 February 2016 pursuant to which all
of the issued share capital of CYB Investments Limited was transferred to Virgin Money UK PLC
(formerly CYBG PLC) by NAB in consideration for the issue and transfer of Virgin Money UK PLC
(formerly CYBG PLC) shares to NAB in part for the benefit of NAB (which NAB subsequently sold
pursuant to the Company’s IPO) and in part for the benefit of NAB shareholders under a scheme of
arrangement under part 5.1 of the Australian Corporations Act.
derivative
A financial instrument that is a contract or agreement whose value is related to the value of an
underlying instrument, reference rate or index.
effective interest rate (EIR)
The rate used to calculate interest income or expense under the effective interest method.
encumbered assets
Assets that have been pledged as security, collateral or legally ‘ring-fenced’ in some other way
which prevents those assets being transferred, pledged, sold or otherwise disposed.
exposure
A claim, contingent claim or position which carries a risk of financial loss.
exposure at default (EAD)
The estimate of the amount that the customer will owe at the time of default.
fair value
The price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction in the principal (or most advantageous) market at the measurement date under current
market conditions.
forbearance
The term generally applied to the facilities provided or changes to facilities provided to assist
borrowers who are experiencing, or are about to experience, a period of financial stress.
full time equivalent (FTE)
The standardised method of measurement that represents the number of hours worked by all
Virgin Money employees, both full time and part time (excluding contractors or long-term
absences).
Group
Virgin Money UK PLC and its controlled entities.
hedge ineffectiveness
Represents the extent to which the income statement is impacted by changes in fair value or cash
flows of hedging instruments not being fully offset by changes in fair value or cash flows of hedged
items.
IFRS 9
The financial instrument accounting standard which was adopted by the Group with effect from 1
October 2018.
IFRS 9 transitional adjustments-
dynamic
That part of the transitional adjustments on regulatory capital arising from the increase in
impairment provisions (on non-credit impaired exposures) from the date of initial adoption of IFRS
9 to the reporting date.
IFRS 9 transitional adjustments-
static
That part of the transitional adjustments on regulatory capital arising from the increase in
impairment provisions on initial adoption of IFRS 9 from those calculated under IAS 39.
impairment allowances
An ECL provision held on the balance sheet for financial assets calculated in accordance with
IFRS 9. The impairment allowance is calculated as either a 12-month or a lifetime ECL.
impairment losses
The ECLs calculated in accordance with IFRS 9 and recognised in the income statement with the
carrying value of the financial asset reduced by creating an impairment allowance. Impairment
losses are calculated as either a 12-month or lifetime ECL.
Internal Capital Adequacy
Assessment Process (ICAAP)
The Group’s assessment of the levels of capital that it needs to hold through an examination of its
risk profile from regulatory and economic capital viewpoints.
Internal Liquidity Adequacy
Assessment Process (ILAAP)
The Group’s assessment and management of balance sheet risks relating to funding and liquidity.
Internal Ratings-Based approach
(IRB)
A method of calculating credit risk capital requirements using internal, rather than supervisory,
estimates of risk parameters.
investment grade
The highest possible range of credit ratings, from ‘AAA’ to ‘BBB’, as measured by external credit
rating agencies.
Level 1 fair value measurements
Financial instruments whose fair value is derived from unadjusted quoted prices for identical
instruments in active markets.
Level 2 fair value measurements
Financial instruments whose fair value is derived from quoted prices for similar instruments in
active markets and financial instruments valued using models where all significant inputs are
observable.
Level 3 fair value measurements
Financial instruments whose fair value is derived from valuation techniques where one or more
significant inputs are unobservable.
200
Main Glossary (continued)
Lifetime ECL
The ECL calculation performed on financial assets where a SICR since origination has been
identified. This can be either a ‘Stage 2’ or ‘Stage 3’ impairment loss depending on whether the
financial asset is credit impaired.
loan to value ratio (LTV)
A ratio that expresses the amount of a loan as a percentage of the value of the property on which it
is secured.
loss-absorbing capacity (LAC)
requirement
The required level of MREL resources that the Group is required to hold to meet its MREL
requirement and applicable capital buffers set by the BoE.
loss given default (LGD)
The estimate of the loss that the Group will suffer if the customer defaults (incorporating the effect
of any collateral held).
Low-carbon economy
An economy based on energy sources that produce low levels of greenhouse gas emissions.
medium-term notes
Debt instruments issued by corporates, including financial institutions, across a range of maturities.
Minimum Requirement for Own
Funds and Eligible Liabilities
(MREL)
A minimum requirement for institutions to maintain equity and eligible debt liabilities, to help ensure
that if an institution fails the resolution authority can use these financial resources to absorb losses
and recapitalise the continuing business.
National Databank
The National Databank provides free mobile data, texts and calls to people in need via Good
Things Foundation’s network of local community partners
Nationwide
Nationwide Building Society, a building society authorised by the PRA and regulated by the FCA
and the PRA under registration number 106078.
Nationwide group
Nationwide and its subsidiary undertakings.
net interest income (NII)
The amount of interest received or receivable on assets, net of interest paid or payable on
liabilities.
Net zero
Negating the amount of greenhouse gases produced by human activity.
Personal lending
Lending to individuals rather than institutions excluding mortgage lending which is reported
separately.
probability of default (PD)
The probability that a customer will default over either the next 12 months or lifetime of the
account.
regulatory capital
The capital which the Group holds, determined in accordance with rules established by the PRA.
residential
mortgage-backed
securities (RMBS)
Securities that represent interests in groups or pools of underlying mortgages. Investors in these
securities have the right to cash received from future mortgage payments (interest and principal).
risk appetite
The level and types of risk the Group is willing to assume within the boundaries of its risk capacity
to achieve its strategic objectives.
risk-weighted assets (RWA)
On and off balance sheet assets of the Group are allocated a risk weighting based on the amount
of capital required to support the asset.
sale and repurchase agreement
(repo)
A short-term funding agreement that allows a borrower to create a collateralised loan by selling a
financial asset to a lender. As part of the agreement, the borrower commits to repurchase the
security at a date in the future repaying the proceeds of the loan. For the counterparty (buying the
security and agreeing to sell in the future) it is a reverse repurchase agreement or a reverse repo.
Scheme
The Group’s defined benefit pension scheme, the Yorkshire and Clydesdale Bank Pension
Scheme.
secured lending
Lending in which the borrower pledges some asset (for example property) as collateral for the
lending.
securitisation
The practice of pooling similar types of contractual debt and packaging the cash flows from the
financial asset into securities that can be sold to institutional investors in debt capital markets. It
provides the Group with a source of secured funding that can achieve a reduction in funding costs
by offering typically ‘AAA’ rated securities secured by the underlying financial asset.
201
Main Glossary (continued)
segment
Generally refers to customer, product or commercial lines unless used within the financial
statements where the results are disclosed on a single segment basis in line with that reported to
the Group’s Chief Operating Decision Maker.
significant increase in credit risk
(SICR)
The assessment performed on financial assets at the reporting date to determine whether a 12-
month or lifetime ECL calculation is required. Qualitative and quantitative triggers are assessed in
determining whether there has been a SICR since origination. The Group considers 30 DPD as a
backstop in determining whether a SICR since origination has occurred.
standardised approach
In relation to credit risk, a method for calculating credit risk capital requirements using External
Credit Assessment Institutions ratings and supervisory risk weights. In relation to operational risk,
a method of calculating the operational capital requirement by the application of a supervisory
defined percentage charge to the gross income of eight specified business lines.
stress testing
The term used to describe techniques where plausible events are considered as vulnerabilities to
ascertain how this will impact the own funds or liquidity which a bank holds.
structured entity
An entity created to accomplish a narrow well-defined objective (for example securitisation of
financial assets). An SE may take the form of a corporation, trust, partnership or unincorporated
entity. SEs are often created with legal arrangements that impose strict limits on the activities of
the SE. May also be referred to as an SPV.
subordinated debt
Liabilities which rank after the claims of other creditors of the issuer in the event of insolvency or
liquidation.
Term Funding Scheme (TFS)
A scheme launched in 2016 by the BoE to allow banks and building societies to borrow from the
BoE at rates close to base rate. This is designed to increase lending to businesses by lowering
interest rates and increasing access to credit.
Tier 1 capital
A measure of the Group’s financial strength. Tier 1 capital comprises the sum of Common Equity
Tier 1 capital and Additional Tier 1 instruments.
Tier 2 capital
Supplementary capital that meets the Tier 2 requirements set out in the Capital Requirements
Regulation, it comprises subordinated debt and other securities and eligible impairment allowances
after regulatory deductions.
Trademark licence agreement
(TMLA)
Trademark licence agreement between the Company and Virgin Enterprises which governs the
use of the ‘Virgin Money’ brand.
unsecured lending
Lending in which the borrower pledges no assets as collateral for the lending (such as credit cards
and current account overdrafts).
value at risk (VaR)
A measure of the loss that could occur on risk positions as a result of adverse movements in
market risk factors (for example rates, prices, volatilities) over a specified time horizon and to a
given level of confidence.
202
Abbreviations
AFD
Approaching financial
difficulty
FVOCI
Fair value through other
comprehensive income
RPI
Retail Price Index
AGM
Annual General Meeting
FVTPL
Fair value through profit or loss
RWA
Risk-weighted asset
ALCO
Assets and Liability
Committee
GDIA
Group Director Internal Audit
SICR
Significant increase in credit
risk
ASX
Australian Securities
Exchange
GDP
Gross Domestic Product
SME
Small or medium-sized
enterprise
AT1
Additional Tier 1
GDPR
General Data Protection
Regulation
SMF
Sterling Monetary Framework
BCBS
Basel Committee on
Banking Supervision
IAS
International Accounting
Standard
SONIA
Sterling Overnight Index
Average
BoE
Bank of England
IASB
International Accounting
Standards Board
TFS
Term Funding Scheme
bps
Basis points
ICAAP
Internal Capital Adequacy
Assessment Process
TFSME
Term Funding Scheme with
additional incentives for SMEs
BTL
Buy-to-let
IFRS
International Financial Reporting
Standard
TMLA
Trademark licence agreement
CCF
Credit conversion factor
ILAAP
Internal Liquidity Adequacy
Assessment Process
UTM
Virgin Money Unit Trust
Managers Limited
CDI
CHESS Depositary Interest
IPO
Initial Public Offering
VaR
Value at risk
CET1
Common Equity Tier 1
Capital
IRB
Internal ratings-based
VMI
Virgin Money Investments
(legal entity name ‘Virgin
Money Unit Trust Managers
CPI
Consumer Price Index
IRRBB
Interest rate risk in the banking
book
VIU
Value-in-use
CRD
Capital Requirements
Directive
ISA
International Standards on
Auditing
CRE
Commercial Real Estate
ISDA
International Swaps and
Derivatives Association
CRR
Capital Requirements
Regulation
JV
Joint venture
CSRBB
Credit spread risk in the
banking book
KMP
Key management personnel
CYBI
CYB Investments Limited
KPI
Key Performance Indicator
DEP
Deferred Equity Plan
LAC
Loss-absorbing capacity
DPD
Days past due
LCR
Liquidity coverage ratio
EAD
Exposure at default
LGD
Loss given default
EBT
Employee benefit trust
LIBOR
London Interbank Offered Rate
ECL
Expected credit loss
LSE
London Stock Exchange
EIR
Effective interest rate
MA
Management adjustment
ERMF
Enterprise Risk
Management Framework
MES
Multiple economic scenarios
ESG
Environmental, Social and
Governance
MRM
Model risk management
EY
Ernst & Young LLP
PD
Probability of Default
FCA
Financial Conduct Authority
POCI
Purchased or originated credit
impaired
FIRB
Foundation internal ratings
based
PRA
Prudential Regulation Authority
FTE
Full time equivalent
RAS
Risk Appetite Statement
FRC
Financial Reporting Council
RMBS
Residential mortgage-backed
securities
203
Other information
Country by Country Reporting
The Capital Requirements (Country by Country Reporting) Regulations 2013 came into effect on 1 January 2014 and place
certain reporting obligations on financial institutions that are within the scope of the European Union’s CRD IV. The purpose of
the Regulations is to provide clarity on the source of the Group’s income and the locations of its operations.
The vast majority of entities that are consolidated within the Group’s financial statements are UK registered entities.
The activities of the Group are described in the Strategic report.
18 months to
31 March 2025
UK
Average FTE employees (number)
7,305
Total operating income (£m)
2,747
Profit before tax (£m)
149
Corporation tax paid (£m)
38
Public subsidies received (£m)
-
The only other non-UK registered entity of the Group is a Trustee company that is part of the Group’s securitisation vehicles
(Lanark and Lannraig). Lannraig Trustees Limited is registered in Jersey. This entity plays a part in the overall securitisation
process by having the beneficial interest in certain mortgage assets assigned to it. This entity has no assets or liabilities
recognised in its financial statements with the securitisation activity taking place in other UK registered entities of the structures.
This entity does not undertake any external economic activity and has no employees. The results of this entity as well as those
of the entire Lanark and Lannraig securitisation structures are consolidated in the financial statements of the Group.
204
Forward-looking statements
This document and any other written or oral material discussed or distributed in connection with the results (the ‘Information’) may include forward-looking
statements, which are based on assumptions, expectations, valuations, targets, estimates, forecasts and projections about future events. These can be
identified by the use of words such as 'expects', 'aims', 'targets', 'seeks', 'anticipates', 'plans', 'intends', 'prospects', 'outlooks', 'projects', ‘forecasts’,
'believes', 'estimates', 'potential', 'possible', and similar words or phrases. These forward-looking statements are subject to risks, uncertainties and
assumptions about the Group and its securities, investments and the environment in which it operates, including, among other things, the development of
its business and strategy, any acquisitions, combinations, disposals or other corporate activity undertaken by the Group, trends in its operating industry,
changes to customer behaviours and covenant, macroeconomic and/or geopolitical factors, changes to its Board and/or employee composition,
exposures to terrorist activity, IT system failures, cyber-crime, fraud and pension scheme liabilities, risks relating to environmental matters such as climate
change including the Group’s ability along with the government and other stakeholders to measure, manage and mitigate the impacts of climate change
effectively, changes to law and/or the policies and practices of the Bank of England (BoE), the Financial Conduct Authority (FCA) and/or other regulatory
and governmental bodies, inflation, deflation, interest rates, exchange rates, tax and national insurance rates, changes in the liquidity, capital, funding
and/or asset position and/or credit ratings of the Group, future capital expenditures and acquisitions, the repercussions of the UK’s exit from the European
Union (EU) (including any change to the UK’s currency and the terms of any trade agreements (or lack thereof) between the UK and the EU), Eurozone
instability, Russia-Ukraine war, the conflict in the Middle East and any UK or global cost of living crisis or recession.
In light of these risks, uncertainties and assumptions, the events in the forward-looking statements may not occur. Forward-looking statements involve
inherent risks and uncertainties and should be viewed as hypothetical. Other events not taken into account may occur and may significantly affect the
analysis of the forward-looking statements. No member of the Group or their respective directors, officers, employees, agents, advisers or affiliates (each
a ‘VMUK Party’) gives any representation, warranty or assurance that any such projections or estimates will be realised, or that actual returns or other
results will not be materially lower than those set out in the Information. No representation or warranty is made that any forward-looking statement will
come to pass. Whilst every effort has been made to ensure the accuracy of the Information, no VMUK Party takes any responsibility for the Information or
to update or revise it. They will not be liable for any loss or damages incurred through the reliance on or use of it. The Information is subject to change.
No representation or warranty, express or implied, as to the truth, fullness, fairness, merchantability, accuracy, sufficiency or completeness of the
Information is given.
Certain industry, market and competitive position data contained in the Information comes from official or third party sources. There is no guarantee of the
accuracy or completeness of such data. While the Group reasonably believes that each of these publications, studies and surveys has been prepared by
a reputable source, no member of the Group or their respective directors, officers, employees, agents, advisers or affiliates have independently verified
the data. In addition, certain industry, market and competitive position data contained in the Information comes from the Group’s own internal research
and estimates based on the knowledge and experience of the Group’s management in the markets in which the Group operates. While the Group
reasonably believes that such research and estimates are reasonable and reliable, they, and their underlying methodology and assumptions, have not
been verified by any independent source for accuracy or completeness, and are subject to change. Accordingly, undue reliance should not be placed on
any of the industry, market or competitive position data contained in the Information.
The Information does not constitute or form part of, and should not be construed as, any public offer under any applicable legislation or an offer to sell or
solicitation of any offer to buy any securities or financial instruments or any advice or recommendation with respect to such securities or other financial
instruments. The distribution of the Information in certain jurisdictions may be restricted by law. Recipients are required to inform themselves about and to
observe any such restrictions. No liability to any person is accepted in relation to the distribution or possession of the Information in any jurisdiction.
205
VIRGIN MONEY UK PLC
Registered number 09595911 (England and Wales)
Head Office:
London Office:
Registered Office:
177 Bothwell Street
Floor 15, The Leadenhall Building
Jubilee House
Glasgow
122 Leadenhall Street
Gosforth
G2 7ER
London
Newcastle Upon Tyne
EC3V 4AB
NE3 4PL
virginmoneyukplc.com