Virgin Money chief executive David Duffy will receive a larger pension payment than the bosses at some of his much larger rivals next year, after the company resisted shareholder pressure to cut his pay.
All four of the UK’s largest retail banks — HSBC, Barclays, Royal Bank of Scotland and Lloyds — have cut or are planning to cut the amount they pay top executives in lieu of pension contributions.
Virgin Money’s latest annual report, published on Thursday evening, said that new appointees would be paid in line with the rest of its staff, who receive a maximum contribution of 13 per cent of their salaries. However, existing executives would continue to receive an allowance worth up to 20 per cent.
Mr Duffy’s salary will be just over £1m in the 12 months to September 2020, giving him a potential pension payment of up to £204,000. Last year he took a payment of 18 per cent of salary or £183,000.
In contrast, Alison Rose, the chief executive of RBS, will receive £110,000, while António Horta-Osório, boss of the UK’s largest retail lender Lloyds, is expected to receive around £190,000.
Virgin, which recently changed its name from CYBG after taking over the original Virgin Money group, was hit by a significant shareholder protest over Mr Duffy’s pay at its most recent annual meeting in January, with a third of shareholders voting against its pay policy. Mr Duffy received a total income of £3.4m in the year to September, roughly equal to the amount paid to Barclays chief Jes Staley.
Adrian Grace, chair of Virgin’s remuneration committee, wrote in the annual report on Thursday that the bank had “exercised an appropriate level of restraint” while keeping pay high enough to “remain effective in the retention of the leadership team”.
The report was published hours after Virgin released its annual results, which were warmly received by investors. Shares in the company leapt by almost a fifth after it reported a smaller-than-feared full-year loss and a more optimistic forecast for the year ahead.
The company reported a pre-tax loss of £232m in the 12 months to September 30, compared to a £164m loss the previous year.
However, the loss was mainly driven by provisions to deal with the PPI mis-selling scandal, plus costs related to the takeover, which completed in October 2018. The PPI charge prompted Virgin to suspend its plans to begin paying a dividend this year, but the final provision of £385m was only lower than most analysts had expected after a profit warning in September.
As a result, the bank’s common equity tier one ratio — a measure of balance sheet strength — was higher than consensus forecasts at 13.3 per cent, allaying concerns that it may have needed to raise capital in the near future.
Mr Duffy said the bank had been able to give investors “clarity and confidence” after recent setbacks, showing that “there’s a really strong business underneath”.
Profit margins have been falling across the UK banking sector as rising competition has hit returns in the all-important mortgage sector. Virgin’s net interest margin — the difference between what it pays for funds and earns from lending — dropped from 1.78 per cent to 1.66 per cent, but it said the decline would slow next year.