UK

Virgin Money ramps up cost cutting as it unveils £130m plan to fight cyber crime

Details of the investment came as the group reported full-year statutory pre-tax profits tumbling 42% to £345 million (Mike Egerton/PA)
Details of the investment came as the group reported full-year statutory pre-tax profits tumbling 42% to £345 million (Mike Egerton/PA) Details of the investment came as the group reported full-year statutory pre-tax profits tumbling 42% to £345 million (Mike Egerton/PA)

Virgin Money has unveiled plans to spend £130 million on artificial intelligence (AI) and technology to help fight cyber crime, but warned the move would impact its performance and lead to further cost cutting.

The high street lender said the spending programme would span three years, with around £40 million earmarked for 2023-24, and comes as new advances in AI have increased the “sophistication and risk of attacks”.

Virgin Money said it would need to cut costs by £200 million a year, up from £175 million previously, to pay for the plans through “further strategic rationalisation of our real estate portfolio, outsourcing and systems simplification”.

It added the plans would put back goals to deliver “double-digit statutory returns”.

Details of the investment came as the group reported full-year statutory pre-tax profits tumbling 42% to £345 million as it set aside £309 million for loans expected to turn sour, up from £52 million the previous year.

David Duffy, chief executive of Virgin Money, said: “We are stepping up investment in our technological capability to future proof our business and protect our customers from the growing risk of fraud strategies driven by advances in AI.”

He added: “This is the right thing to do for customers and the bank in the long term, safeguarding and protecting both as the environment evolves, and will support sustainable shareholder returns over time.

“While the investment will impact on returns in the short term, we believe it mitigates against the risk of greater impact on the bank and our customers in the future.”

The group said its plans to invest in fraud and cyber crime prevention come as the threat has risen significantly recently.

It said: “The rapidly increasing prevalence of online channels and social media are driving higher instances of fraud and financial crime in the UK.

“Increasingly, this will become an area where banks bear the full extent of fraud losses and associated penalties.

“Cyber crime represents another area of significant development, with new technologies including AI increasing the sophistication and risk of attacks.”

The group’s cost cutting has already seen it shut swathes of its branches, with the group announcing in July that it would shut almost a third of its bank branches due to the shift towards online banking.

It said it was axing another 39 branches, which will leave it with 91 across the UK, in a move that is putting 255 jobs at risk.