Full Year Results

5 March 2015

Pursuant to Listing Rule 9.6.1, copies of the following documents have been submitted to the UK Listing Authority and will shortly be available for inspection at the UK Listing Authority's Document Viewing Facility, via the National Storage Mechanism, which is located at: www.hemscott.com/nsm.do.

· Annual Report and Accounts 2014

A copy of the Annual Report and Accounts 2014, Pillar III Report 2014 and an investor presentation are available within the Investor Relations section of our website www.virginmoney.com.

This announcement also contains additional information for the purposes of compliance with the Disclosure and Transparency Rules, including principal risks and uncertainties, details of related party transactions and a responsibility statement. Reference to pages and numbers refer to page numbers and notes to the annual accounts in the Annual Report and Accounts 2014.

Virgin Money Holdings (UK) plc

Full year results

BASIS OF PRESENTATION

This report covers the results of Virgin Money Holdings (UK) plc together with its subsidiaries ("Virgin Money" or "the Group") for the year ended 31 December 2014.

Statutory basis

Statutory information is set out in the Financial Statements section of this announcement.

Underlying basis

In order to present a more meaningful view of business performance, the results of the Group and business units are presented on an underlying basis of reporting are described below.

The following items have been excluded from underlying profits;

· credit card and current account platform build;

· costs associated with listing;

· additional Northern Rock consideration;

· FSCS levies;

· fair value adjustments;

· gain on sale of subsidiary and trading loss of disposal group; and

· premium on repurchase of Non-core Tier 1 notes.

Note: 2013 figures are restated. See note 39 of the financial statements for details.

The financial statements have been restated as set out in Note 39: the Group has adopted IFRIC 21 which has resulted in a reassessment of the liability recognised in previous periods in relation to the FSCS levy. During the year, the Group undertook a review of the allocation and classification of both costs and income. Following this review, the Group has realigned elements of fee and commission income, fee and commission expense and operating expenses to better reflect the nature of these costs. The Group has restated information for the preceding comparative periods.

Unless otherwise stated, income statement commentaries throughout this document compare the year ended 31 December 2014 to the year ended 31 December 2013, and the balance sheet analysis compares the Group balance sheet as at 31 December 2014 to the Group balance sheet as at 31 December 2013.

Forward looking statements

This document contains certain forward looking statements with respect to the business, strategy and plans of Virgin Money Group and its current goals and expectations relating to its future financial condition and performance. Statements that are not historical facts, including statements about Virgin Money Group's or its directors' and/or management's beliefs and expectations, are forward looking statements. By their nature, forward looking statements involve risk and uncertainty because they relate to events and depend upon circumstances that will or may occur in the future. Factors that could cause actual business, strategy, plans and/or results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward looking statements made by the Group or on its behalf include, but are not limited to: general economic and business conditions in the UK and internationally; inflation, deflation, interest rates and policies of the Bank of England, the European Central Bank and other G8 central banks; fluctuations in exchange rates, stock markets and currencies; changes to Virgin Money's credit ratings; changing demographic developments, including mortality and changing customer behaviour, including consumer spending, saving and borrowing habits; changes in customer preferences; changes to borrower or counterparty credit quality; instability in the global financial markets, including Eurozone instability and the impact of any sovereign credit rating downgrade or other sovereign financial issues; technological changes; natural and other disasters, adverse weather and similar contingencies outside Virgin Money's control; inadequate or failed internal or external processes, people and systems; terrorist acts and other acts of war or hostility and responses to those acts; geopolitical, pandemic or other such events; changes in laws, regulations, taxation, accounting standards or practices; regulatory capital or liquidity requirements and similar contingencies outside Virgin Money's control; the policies and actions of governmental or regulatory authorities in the UK, the European Union, the US or elsewhere; the implementation of the EU Bank Recovery and Resolution Directive and banking reform, following the recommendations made by the Independent Commission on Banking; the ability to attract and retain senior management and other employees; the extent of any future impairment charges or write-downs caused by depressed asset valuations, market disruptions and illiquid markets; market relating trends and developments; exposure to regulatory scrutiny, legal proceedings, regulatory investigations or complaints; changes in competition and pricing environments; the inability to hedge certain risks economically; the adequacy of loss reserves; the actions of competitors, including non-bank financial services and lending companies; and the success of Virgin Money in managing the risks of the foregoing.

Any forward-looking statements made in this document speak only as of the date they are made and it should not be assumed that they have been revised or updated in the light of new information of future events. Except as required by the Prudential Regulation Authority, the Financial Conduct Authority, the London Stock Exchange plc or applicable law, Virgin Money expressly disclaims any obligation or undertaking to release publicly any updates of revisions to any forward-looking statements contained in this document to reflect any change in Virgin Money's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

VIRGIN MONEY GROUP 2014 RESULTS

§ Record performance and profits in a landmark year for the business

§ Underlying profit before tax increased by 127 per cent to £121.2 million, from £53.4 million in 2013

GROWTH

Delivered strong growth in mortgage, savings and credit card balances

· Mortgage balances increased to £21.9 billion, up 11.8 per cent against market growth of 1.4 per cent.

· Net lending of £2.3 billion, a market share of 10.2 per cent.

· Credit card balances increased to £1.1 billion, up 41 per cent.

· Retail deposit balances increased to £22.4 billion, up 6 per cent.

QUALITY

Maintained focus on a high-quality balance sheet, underpinned by high asset quality and a conservative risk appetite

· Held mortgage arrears at low levels, with loans over three months in arrears of 0.31 per cent compared with the latest industry average of 1.33 per cent.

· Maintained low credit card arrears, with credit card balances two or more payments in arrears of 1.46 per cent, compared with the latest industry average of 2.64 per cent.

· Strong capital position, with a fully-loaded Common Equity Tier 1 ratio of 19.0 per cent in 2014, compared to 15.5 per cent in 2013.

· Strong leverage ratio, increasing to 4.1 per cent in 2014 from 3.8 per cent in 2013.

RETURNS

Delivered significant improvement in profitability, reflecting balance sheet growth and higher margins

· Underlying profit before tax increased by 127 per cent to £121.2 million, from £53.4 million in 2013.

· Underlying net interest margin grew by 24 basis points to 1.50 per cent, from 1.26 per cent in 2013.

· Underlying cost:income ratio improved to 68.7 per cent, from 77.2 per cent in 2013.

· Underlying return on tangible equity grew by 5.1 percentage points to 7.4 per cent, from 2.3 per cent in 2013.

· Statutory profit before tax of £34.0 million despite costs associated with the Initial Public Offering and payment of additional consideration for Northern Rock plc to HM Treasury following the successful listing on the London Stock Exchange.

CULTURE

As well as delivering a strong corporate performance, Virgin Money also delivered to other stakeholders in 2014

· Customers - increased overall Net Promoter Score, a key measure of customer advocacy, to +16, one of the highest scores of any UK bank.

· Communities - over £88 million was donated to charities in 2014, including Gift Aid, through Virgin Money Giving, Virgin Money's not-for-profit online donation service.

· Corporate partners - over 13,000 Intermediary Partners introduced mortgage business to Virgin Money in 2014, and the Group was awarded the coveted Five Star Financial Adviser award for intermediary service.

· Colleagues - increased colleague engagement to 86 per cent, the level of a large high-performing UK company and an overall share in success bonus and IPO share award, averaging over 11 per cent of base salary, was awarded to eligible employees, on top of their normal bonus awards.

2014 was a landmark year in Virgin Money's history, culminating in our successful listing on the London Stock Exchange in November.

"I am delighted to report a 127 per cent increase in underlying profit for 2014 which ended the year at £121.2 million.

"We have made great progress against our objectives to achieve strong growth, maintain our high-quality balance sheet and deliver returns to shareholders. We set out to be a credible and effective challenger to the large incumbent banks and I believe we have laid an excellent foundation on which to realise our ambition. We now rank in the top six of all UK net mortgage lenders and are among the highest rated retail banks in the UK by Net Promoter Score.

"We aim always to live up to the consumerchampion ethos of the Virgin brand and our conservative approach to risk and strong financial performance go hand in hand with our commitment to serve the needs of customers and communities.

"Following the progress made in 2014 I am pleased to report that we expect to be admitted to the FTSE 250 on 20 March 2015.

"Our staff are at the heart of Virgin Money and I would like to thank them for their hard work throughout what has been a landmark year for the business. I am pleased we are able to reward all eligible employees with a share in success bonus on top of their normal bonus awards, to add to the £1,000 of shares that all employees received on listing."

Jayne-Anne GadhiaChief Executive

STRATEGIC UPDATE AND OUTLOOK

Continued strong performance in 2014 provides a positive platform for the future

STRATEGIC UPDATE

· Overall our guidance for the mid-term is unchanged from that given prior to listing.

· We continue to target mid-teens return on tangible equity by the end of 2016.

· We will continue to maximise our net interest margin within our prudent risk appetite.

· Our net interest margin will be further enhanced in the longer term by the growth of our credit card business which we are building in partnership with TSYS. 

· We will continue to take advantage of our operational leverage to deliver a cost:income ratio of around 50 per cent by 2017.

· 2015 will see us continue to enhance our existing capabilities, and develop our current account, insurance and digital offerings.

· As announced in September 2014, Glen Moreno will assume the Chairmanship of Virgin Money in May 2015, taking over from the current Chairman, Sir David Clementi. Sir David will stand down as Chairman of the Board on 21 May 2015 and will retire as Non-Executive Director of Virgin Money on 30 June 2015.

OUTLOOK

· The UK economy is performing well although there remains uncertainty at home and abroad.

· Despite an increasingly competitive market environment, we plan to continue to achieve a market share of annual gross mortgage lending of over 3 per cent. We will build upon our existing high-quality mortgage business, without significantly increasing our risk appetite.

· We have the core infrastructure needed to grow to our target of £3 billion of credit card balances by the end of 2018. Growth in credit cards will enhance our net interest margin and our return on equity, and will enable us to drive further capital efficiency.

· We are uniquely placed to provide effective competition to the large incumbent banks in the UK and we look forward to the outcome of the Competition and Markets Authority (CMA) investigation into Retail and SME banking.

· According to Bank of England data, in January we took almost 4 per cent market share of mortgages, reinforcing our confidence in our strategy and in delivering our organic plan for growth.

UNDERLYING BASIS CONSOLIDATED INCOME STATEMENT

UNDERLYING BASIS consolidated balance sheet and key ratios

Assets

liabilities and equity

KEY RATIOS

1 Cost of risk excludes benefit of debt sale of £8.9 million 

RECONCILIATION TO STATUTORY PROFIT

Chief Executive's REVIEW

"2014 was a significant year in Virgin Money's history, culminating in our successful listing on the London Stock Exchange in November.

As well as completing our IPO, we delivered excellent business performance, maintaining our strong growth momentum, continuing to build our high-quality balance sheet and delivering improving returns.

As a public company we remain committed to maintaining our straightforward, transparent approach to banking that we believe is better for customers. With our powerful brand, high-quality balance sheet and strong core business franchise, we remain confident that we can continue our growth trajectory, improving our net interest margin while protecting the quality of our balance sheet, and can generate increasing returns and dividends for our shareholders.

Results overview

2014 was an important year in positioning Virgin Money as a leading challenger bank, able to grow on its strong foundations, untainted by legacy issues.

We improved our financial performance substantially in 2014. We increased our underlying profit by 127 per cent to £121.2 million, as a result of our focus on driving growth, quality and returns.

On an underlying basis, our total income grew by 21 per cent to £438.2 million, driven mainly by strong growth in our mortgage business and a 24 basis point increase in our net interest margin to 1.50 per cent, while our total costs increased by 8 per cent to £301.2 million. During the year, the total impairment charge fell by 15 per cent to £24.7 million, excluding a further benefit of £8.9 million arising from the sale of credit card debt.

As a result, the Group's underlying return on risk-weighted assets improved by 103 basis points to 1.41 per cent, and our underlying return on tangible equity improved from 2.3 per cent to 7.4 per cent.

On a statutory basis, Virgin Money delivered a profit before tax of £34.0 million, compared to £185.4 million in 2013. This reduction in our statutory profit is a reflection of an exceptional gain of £203.4 million in 2013 related to the disposal of Virgin Money Cards Limited, which was undertaken in parallel with our acquisition of £1 billion of Virgin Money credit cards from MBNA, as well as one-off costs in 2014 related to our IPO.

Our strong growth performance during the year was achieved whilst maintaining a high-quality balance sheet. At the end of the year, our fully-loaded Basel III Common Equity Tier 1 capital ratio was 19.0 per cent, our leverage ratio was 4.1 per cent and our loan-to-deposit ratio was 102.8 per cent. During the year, we continued to manage our balance sheet carefully with a view to maintaining its quality and efficiency.

Delivering outstanding growth

Growth potential exists across our business as demonstrated by our performance in 2014. Our ability to capture that growth potential has been enhanced through our successful listing on the London Stock Exchange in November 2014.

Mortgages

We delivered gross mortgage lending of £5.8 billion in 2014, and achieved 12 per cent growth in mortgage balances to £21.9 billion. This represents a market share of mortgage stock of 1.7 per cent. Over the year, our growth of 12 per cent in mortgage balances exceeded market growth of 1.4 per cent.

We took steps to accelerate our lending in the second half of the year, in light of renewed capital guidance from the Prudential Regulation Authority and the receipt of £150 million of primary capital from our IPO. We were pleased to achieve a second half market share of gross mortgage lending of 3.1 per cent and continue to anticipate a market share of more than 3.0 per cent in each of the years to come.

Our mortgage business remains high-quality, with an average loan-to-value of new lending of 67 per cent and a buy-to-let exposure of around 15 per cent. Impairments in our mortgage business reduced significantly during the course of the year.

Mortgage distribution performed particularly strongly during 2014 with significant growth in our intermediary channel achieved through a focus on product quality, transparency to customers and superior service. Our success in this channel was recognised towards the end of the year by the intermediary market awarding us the coveted Five Star Financial Adviser award for service.

Our performance was particularly pleasing given the changes in the mortgage market in 2014 following the introduction of the Mortgage Market Review (MMR). We had prepared thoroughly for the implementation of these requirements in April 2014 and were able to continue to build our business with confidence following the introduction of the new rules.

We remain of the view that our intermediary-led distribution model is a competitive advantage given the importance of advice in the post-MMR world.

Credit cards

A further important development in 2014 has been the successful establishment of our own in-house credit card business.

This business will enable us to diversify our asset mix and grow the volume of high-quality credit card lending that we have previously delivered successfully in partnership with MBNA.

We have partnered with TSYS to build our own cards platform and, as a result, we have created scalable, low-cost, flexible operations.

During the course of 2014 we completed our agreement with MBNA to acquire a proportion of the book that we had built with them over previous years and to transfer to our own balance sheet new business written in 2013 and 2014.

As a result, we ended the year with credit card balances of £1.1 billion and with the core infrastructure needed to grow to our target of £3 billion of credit card balances by the end of 2018. Growth in credit cards will enhance our net interest margin and our return on equity, and will enable us to achieve a more efficient use of our capital, taking account of risk-weighted capital requirements and leverage ratio requirements.

Deposits

Our deposits franchise continued to flourish in 2014. We continued to offer customers a range of competitively-priced instant access and fixed term products as well as Cash ISAs, through all our channels: store, online, digital and telephone. Our online-led distribution model, supported by our efficient national store footprint, was a key factor in growing our retail deposit business in a cost-effective way during the year.

During the course of the year our deposit balances grew by 6 per cent to £22.4 billion, a market share of 1.4 per cent. Both the average tenor of our retail deposit base and our customer retention improved during the year. Our performance during 2014 gives us great confidence in our ability to grow our retail deposits on an ongoing basis in the years to come.

Access to funding to support growth

We made further progress in diversifying our funding position during the year. In September 2014 we completed our fourth public issuance under our securitisation programme. Strong investor demand enabled us to raise £1 billion from investors at attractive margins. We also accessed the Funding for Lending scheme to support our mortgage growth.

Building capabilities for future growth

During the year we made significant strides in expanding our product range. The build of our current account - the Virgin Essential Current Account - was completed in December 2013, and a pilot operated in Stores in Scotland and Northern Ireland during 2014. Following the success of this initiative, we will offer this product through all Stores in 2015.

Our potential to grow profitably at scale in current accounts is limited by the structure of the UK current account market, including the low level of switching and the predominance of free-if-in-credit banking. We look forward to the recommendations of the CMA and believe we are well-placed to grow in this important market if, as we hope, their recommendations result in a properly competitive current account marketplace.

We also developed our insurance capabilities during the course of 2014 through the build of our new life insurance proposition with our partner Friends Life and through the establishment of an attractive contractual relationship with Ageas for home and motor insurance. These products, in addition to our successful travel insurance and pet insurance businesses, position us well for the years to come.

During 2014 we agreed a contract with Monitise to provide Virgin Money with enhanced digital capability. We expect the first output from this agreement to be available for consumers in 2015.

Maintaining a high-quality balance sheet

In 2014 we continued to focus on ensuring that our balance sheet is safe, secure and fit for purpose for both the regulatory environment of today and that of the future. Our capital position exceeds the requirements of Basel III well in advance of its full implementation at the start of 2019.

Our fully-loaded Common Equity Tier 1 ratio improved to 19.0 per cent at the end of 2014. During the year we raised £150 million of new equity capital at the time of our IPO. We raised a further £160 million through Additional Tier 1 securities in July, and used these funds to repay Non-core Tier 1 notes held by the Government following our acquisition of Northern Rock plc, benefiting our cost of capital. These developments demonstrate our ability to increase and diversify our capital base.

We were not required to participate in the 2014 UK-wide stress test, which was applied to the eight largest banks and building societies. However, we replicated in full the UK stress test scenario, which included a substantial fall in house prices along with rising interest rates and unemployment, and the results demonstrate we have adequate resources to withstand such a scenario.

Our leverage ratio improved to 4.1 per cent at the end of 2014, well in excess of the 3.0 per cent minimum requirement and above the level, including a leverage ratio buffer that we expect to be required to hold as a ring-fenced bank.

During the course of the year we continued to focus on our liquidity position and remain confident, although always vigilant, that our liquidity policy enables us to achieve an appropriate balance between profitability and liquidity risk.

In January 2014 the rating agency Fitch upgraded Virgin Money plc's long-term rating to BBB+ and its short-term rating to F2. These ratings were further affirmed by Fitch in November 2014.

Delivering improving returns

The improvement in our underlying return on tangible equity from 2.3 per cent to 7.4 per cent reflects the successful delivery of our business plan for the year.

Key contributors to this improvement were strong growth in mortgage balances and a significant improvement in our net interest margin, enabling us to grow income during the year by 21 per cent. We also saw the total impairment charge for the year almost halve, supported by continued low interest rates and a benefit from the sale of credit card debt.

Management of cost remains a key focus for the business and underlying cost growth during the year was limited to 8 per cent, meaning that we further improved our cost:income ratio.

We believe there is still significant scope to improve our cost efficiency and we are confident that our returns will be enhanced by taking further advantage of our operational leverage in the years to come.

Colleagues and communities

Our positive results for 2014 would not have been possible without the hard work of our colleagues at Virgin Money, and their commitment to our vision to create a better bank for the benefit of customers and communities in the UK, and to provide fair, sustainable and growing shareholder returns.

Despite the workload and pressures of 2014, the results of our Staff Engagement Survey continue to be world-class, with an industry-leading staff engagement score of 86 per cent.

I am pleased that, during the year, we were able to continue our work to support our local communities, both through sponsorships such as the London Marathon and our investment in our not-for-profit online donation engine Virgin Money Giving. Virgin Money Giving enhances the Virgin Money brand and around five per cent of Virgin Money Giving users go on to become Virgin Money customers.

In December we announced our intention to create the Virgin Money Foundation, supported by £4 million of Government funding and an initial £1 million from Virgin Money, with a view to investing in good causes in the North East of England. The Foundation will, over time, make a significant impact on communities across the UK.

Customers

Ours is a national customer base with access to Virgin Money through all forms of distribution channels including online, mobile, intermediary, store, telephone and also through our Virgin Money Lounges.

Investment in the digital channel in 2014 has continued to develop both functionality and content to enhance our customer experience. For example, customers are increasingly accessing us online through mobile devices, with almost 30 per cent of website visits in 2014 made in this way, and in recognition of this we made significant progress during the year in building a mobile solution for our customers.

During 2014 we opened new Virgin Money Lounges in the centre of London and in Glasgow, and I am pleased to report that all of our Lounges have enjoyed materially increasing footfall and that the Net Promoter Score (NPS) results that they drive are in excess of those of leading retailers. However, it is not just our Lounges that drive excellent customer service. With an overall NPS score of +16, we believe that we are one of the leading UK retail banks for customer service and we remain the only major UK bank to resolve all complaints within eight weeks.

It is our intention to continue to build on our customer franchise, the positive attributes of our brand and our position as a trusted consumer champion in the UK retail banking market.

Management team

A key driver of our future performance is ensuring we have the right management team in place. To support continued growth in the business and the planned expansion of product lines, we have strengthened the Executive further.

Richard Hemsley has recently joined as Chief Banking Officer, with overall responsibility for the commercial performance of all non-cards products lines, as well as the customer and operations divisions that support them. Darrell Evans has also been appointed as a new Commercial Director to lead growth in current accounts, insurance and investments. I am delighted to welcome Richard and Darrell to Virgin Money.

Outlook

Our vision is to bring a positively-differentiated approach to banking through our ambition to make 'everyone better off'. We will achieve this by delivering good value to our customers, treating colleagues well, making a positive contribution to society, building positive relationships with partners and delivering growing shareholder returns.

In delivering our vision, we aim to achieve strong and sustainable growth in our business while maintaining our high-quality balance sheet, and in so doing provide increasing returns for our shareholders.

I am delighted that in 2014 we have delivered strongly against this objective. We have delivered strong financial results, we have built a robust platform for the future, and we have listed successfully on the London Stock Exchange.

In closing I wish to thank Sir David Clementi for his stewardship and guidance during the last three years. I look forward to working with Glen Moreno as he takes over during the course of 2015 as Chairman of Virgin Money. I know that together and with the support of all our Virgin Money colleagues we will continue to develop the leading challenger bank that will provide growth, quality and returns for all our stakeholders.

Jayne-Anne Gadhia CBE

Chief Executive

Chief Financial Officer's Overview of Performance

In 2014, we delivered growth in the balance sheet, maintained high asset quality, significantly improved profitability and strengthened capital ratios to support continued growth. Income grew as mortgage lending increased and funding costs fell, more than offsetting lower yields on mortgage lending. Expenses continued to grow at a lower rate than income which, combined with a reduction in the cost of risk, resulted in an increase in underlying profits from £53.4 million to £121.2 million.

Significantly improved underlying profitability

Group underlying profitability more than doubled compared to 2013, increasing by £67.8 million to £121.2 million. The underlying return on tangible equity improved to 7.4% from 2.3% principally due to increased underlying profitability and after taking into account the £150 million of new capital raised as part of our listing in November 2014. After expenses charged directly to equity relating to the capital raise, the net increase in common equity from the listing was £145.4 million.

Underlying net interest income grew by 27% to £366.1 million as a result of improved net interest margin and growth in mortgage balances, which also drove growth in underlying total income of 21% to £438.2 million. Underlying other income was broadly unchanged at £72.1 million.

We maintained our focus on cost control and efficiency, with total underlying costs growing by 8% to £301.2 million, reflecting mainly the continued build out of capability in and increased headcount to support the launch of our credit card business on our own platform.

The impairment charge fell by 45% to £15.8 million reflecting continued high asset quality and lower customer defaults due to the low interest rate environment. In addition, this reduction included a positive adjustment of £8.9 million following a successful sale of charged-off credit card balances.

Underlying earnings per share was 21.4p in 2014 compared to underlying earnings per share of 8.1p in 2013.

Our statutory profit before tax of £34.0 million for 2014 compared to a statutory profit before tax of £185.4 million in 2013. This was primarily as the result of recording a gain on the sale of a subsidiary of £203.4 million in 2013, as well as one-off Initial Public Offering transaction costs in 2014.

In 2014 the Group was subject to a higher effective tax rate than the UK statutory rate primarily due to a one-off payment to HM Treasury and listing costs incurred during the year not being deductible for tax purposes.

Statutory profit after tax was £8.7 million and earnings per share was (0.4)p including the cost of distributions on Additional Tier 1 securities and Non-core Tier 1 notes, compared to the earnings per share of 42.4p in 2013.

Strong, low risk balance sheet with a capital base to support growth

We have continued to grow the balance sheet while strengthening our capital position. We aim to maximise balance sheet efficiency while remaining within our prudent risk appetite.

During the year the Group grew customer deposit balances by 5.9% or £1.2 billion in line with market growth of 6.3%. Mortgage balances grew by 12% to £21.9 billion significantly ahead of market growth of 1.4%. The loan-to-deposit ratio increased to 102.8% from 96.4% over the course of the year, in line with our aims of increasing balance sheet efficiency and funding diversification, and our plan for a loan-to-deposit ratio above 100% but not exceeding 110%.

The Group's fully loaded CRD IV Common Equity Tier 1 ratio improved to 19.0% from 15.5% at 31 December 2013 primarily driven by the net £145.4 million increase in common equity from new capital raised as part of our IPO. In addition, Virgin Money agreed significantly lower risk weightings for mortgage lending with the PRA in July 2014 which resulted in mortgage risk-weighted assets reducing to £3,489.7 million from £3,860.2 million (excluding operational risks) despite the 12% increase in mortgage balances.

The Group's fully loaded CRD IV leverage ratio increased to 4.1% from 3.8% at the end of 2013, due to the increase in leverage ratio eligible capital more than offsetting the increase in eligible assets.

Underlying income

Underlying net interest income increased by 27% to £366.1 million in 2014. The growth in underlying net interest income reflected the improved underlying net interest margin as well as the increase in mortgage balances. Other income was 0.3% or £0.2 million lower at £72.1 million.

The improvement in net interest margin to 1.50% in 2014 was principally driven by a reduction in retail cost of funds, against a background of falling interest rates across the market, which more than offset a small decline in mortgage margin. Credit card margin was broadly unchanged.

Total underlying costs

Total underlying costs increased by 8% to £301.2 million from £279.2 million in 2013 mainly due to the continued build out of capability and increased head count to support the launch of our credit card business on our own platform.

On an underlying basis, income increased by £76.7 million while the increase in our administrative expenses was limited to £22.0 million. As a result, in 2014 the underlying cost:income ratio improved by 8.5 percentage points to 68.7% from 77.2% in 2013.

Impairment

The impairment charge reduced by 45% to £15.8 million, reflecting continued high asset quality of the loan portfolio and the low level of defaults resulting from the low interest rate environment. In addition, this reduction included a positive adjustment of £8.9 million following a successful sale of charged-off credit card balances.

The cost of risk or the impairment charge expressed as a percentage of average loans and advances improved by 8 basis points to 7 basis points from 15 basis points in 2013.

Impaired loans as a percentage of loans and advances reduced to 0.5% from 0.7% at 31 December 2013, driven by the increase in property values reducing the loan-to-value below the threshold for impaired status. Provisions as a percentage of impaired loans increased to 29.5% from 25.1% at 31 December 2013. This rise was primarily due to an increase in the provision against buy-to-let mortgages following a small number of operational losses seen in 2014 as well as growth in buy-to-let mortgage balances. This has been partially offset by a reduction in the credit card impairment provision as a percentage of credit card balances following the acquisition of £359.3 million additional Virgin Money branded credit cards from MBNA in November 2014. While provisions plus excess expected loss decreased, impaired loan balances fell by a greater percentage and so the total coverage increased from 43.5% to 53.6%.

Statutory profit

Our statutory profit before tax of £34.0 million for 2014 compared to a statutory profit before tax of £185.4 million in 2013. This was primarily as the result of recording a gain on the sale of a subsidiary of £203.4 million in 2013, as well as one-off Initial Public Offering transaction costs in 2014. The additional costs recognised in the statutory profit before tax are set out below.

Capital issuance

The terms agreed in respect of the acquisition of Northern Rock on 1 January 2012 included an amount payable to HM Treasury in the event of a successful, profitable IPO or sale of Virgin Money between 2012 and 2016. On completion of the listing in November 2014, the maximum consideration payable of £50.0 million was crystallised and £36.0 million of this amount was recognised in 2014. The Group incurred costs of £12.6 million in relation to its listing including underwriting commissions, professional advisers, other offer-related fees and expenses and VAT. A further £11.3 million of costs were incurred on listing, of which £10.7 million in share based awards and £0.6 million in one-off payments. In addition, the Group paid a £4.5 million premium on the repurchase of NCT1 notes from UKFI.

Strategic items

The Group incurred strategic transaction costs of £9.0 million relating to investment in credit card and digital platforms.

In addition, the Group recognised a gain on the sale of Church House Trust of £4.5 million and a trading loss prior to disposal of £1.0 million. Fair value adjustments arising from the acquisition of Northern Rock amounted to £0.9 million.

FSCS levies

FSCS levies amounted to £16.4 million.

Taxation

In 2014 the Group was subject to a higher effective tax rate than the UK statutory rate primarily due to charges recognised during the year not being deductible for tax purposes. These charges included the additional consideration payable to HM Treasury (£36.0 million) and costs relating to the IPO (£12.6 million). In addition, there was an adjustment to prior year tax charges (£8.3 million).

Balance sheet

We have significantly strengthened the Group's capital ratios during the year. The Group's fully loaded Common Equity Tier 1 ratio has increased to 19.0% from 15.5% at 31 December 2013. The improvement was driven by a net increase of £145.4 million in new Common Equity Tier 1 capital raised as part of our listing in November 2014 as well as a significant reduction in risk weights which was agreed with the PRA in July 2014. This reduction in risk weights meant that while mortgage balances grew 12% year on year, mortgage risk-weighted assets (including operational risks) fell by 8% to £3,729.8 million (2013: £4,036.2 million).

The Group's total capital ratio under prevailing rules improved to 22.1% from 18.6% at 31 December 2013. Leverage ratio eligible capital was maintained by the issuance in July 2014 of £160 million of Additional Tier 1 securities which are listed on the Luxembourg Stock Exchange. £154.5 million of the proceeds of the Additional Tier 1 securities were used on 31 July 2014 to repurchase £150 million of Non-core Tier 1 notes from HM Treasury following a competitive auction process undertaken by UKFI, including a premium of £4.5 million.

1. Level 1 + 2a + 2b. See Risk Report page 201 of the Annual Report & Accounts for definition. These include Funding for Lending drawings which are held off balance sheet but are available for repo and hence count towards liquidity resources.

During 2014 loans and advances to customers increased by £2,750.6 million to £23,093.1 million and customer deposits grew by £1,244.3 million to £22,365.7 million, resulting in a loan-to-deposit ratio of 102.8%. Virgin Money has a strong and diversified funding base, with funding provided by retail deposit customers representing 84.3% of total liabilities and equity.

The Group aims to manage its balance sheet so that customer asset growth is broadly matched with sustainable retail deposit growth and monitors this through the loan-to-deposit ratio which is actively managed to ensure compliance with Board approved metrics. The loan-to-deposit ratio was 102.8% at 31 December 2014, compared to 96.4% at 31 December 2013.

Residential Mortgage Backed Security notes in issue increased by £124.3 million to £1,594.1 million during 2014 from £1,469.8 million in 2013 due to the completion of the Gosforth Funding 2014-1 transaction in September more than offsetting the paying down of outstanding funding from prior transactions.

In addition to non-retail funding on the balance sheet, the Group also accessed the Government's Funding for Lending Scheme (FLS), with £1.1 billion drawn during the year to support lending growth and liquidity. Total drawings from the Funding for Lending Scheme at 31 December 2014 were £2.3 billion. If this funding were on balance sheet, total non-retail funds would have represented 17.3% of total funding at the end of 2014. All Funding for Lending Scheme drawings remain off balance sheet and are therefore not included in the table above.

Given the balance sheet consists predominantly of long-term mortgage assets, the Group does not rely on short-term wholesale funding, which can introduce refinancing risk. Virgin Money maintains a portfolio of High Quality Liquid Assets which consists mainly of deposits held at the Bank of England and UK Government bonds, which are available to meet cash and collateral outflows.

The Group's liquidity position remains strong, with High Quality Liquid Assets of £4,235.9 million at 31 December 2014 (31 December 2013: £3,592.4 million). High Quality Liquid Assets represent approximately 5.1 times our wholesale funding with a maturity of less than one year, providing a substantial buffer in the event of an extended market dislocation. In addition there are regular stress tests of the Group's liquidity position against a range of stress scenarios which further ensure that a robust level of High Quality Liquid Assets is maintained at all times.

The Liquidity Coverage Ratio (LCR) will become the Pillar 1 standard for liquidity in the UK from October 2015 and the PRA has the ability to impose firm-specific liquidity requirements. European legislation specifying the definition, calibration, calculation and phase-in of the LCR in 2015 was published in October 2014. We are confident that we will meet our obligations under these revised requirements. 

Conclusion

Virgin Money has delivered growth in customer balances, a continued high quality balance sheet and increased returns. The progress in growing our balance sheet while also strengthening the Group's capital ratios positions us well to continue growing our business within our prudent risk appetite.

Lee Rochford

Chief Financial Officer

Underlying segmental analysis

* Operational risk-weighted assets only.

Basis of preparation of financial results

In order to present a more meaningful view of business performance, the results of the Group and business units are presented on an underlying basis of reporting are described below.

The following items have been excluded from underlying profits;

· credit card and current account platform build;

· costs associated with listing;

· additional Northern Rock consideration;

· FSCS levies;

· fair value adjustments;

· gain on sale of subsidiary and loss on disposal group; and

· premium on repurchase of non tier 1 notes.

Note: 2013 figures are restated. See note 39 of the financial statements for details.

Our Treasury function is not managed as a profit centre. Interest expense incurred from its funding and liquidity operations is allocated to the business lines respectively.

MORTGAGES AND SAVINGS

Key developments - Mortgages

· Our mortgage book growth of 12% in 2014 exceeded market growth of 1.4%, driven by strong new lending of £5.8 billion (a 2.8% full year gross lending share, trending above 3.15% in H2 2014). Combined with strong customer retention, this meant we delivered a 10.2% share of net lending during the year.

· Our focus on mortgage process effectiveness reduced the time taken to process an application through to offer stage by 17%.

· Our intermediary service was recognised by winning a coveted 'Five Star' service award from Financial Adviser.

· We successfully retained 69% of customers whose fixed rate or tracker products matured in 2014.

· Our buy-to-let offer was extended to 75% loan-to-value (LTV) lending, whilst maintaining our overall portfolio appetite for buy-to-let business.

· Our mortgage impairments of £1.2 million reflect our conservative risk appetite, strong risk management and resulting high-quality mortgage book.

· Our provisions represented 29.5% of impaired loans. In addition to our provisions, which anticipate low losses following default because of the quality of the book and low loss experience, we have a regulatory requirement to make an adjustment to capital (the excess expected loss) which amounts to a capital deduction of £33.4 million.

Key developments - Savings

· Our savings book growth was managed across the year and grew by 6% in line with the growth in the retail savings market.

· We took a 1.5% share of inflows across the market and delivered a strong share of ISA new business at 7.6%.

· We grew our balances by £1.2 billion and opened over 220,000 savings accounts.

· We retained 83% of our maturing fixed rate customers - up from 78% in 2013.

2014 financial highlights

· Increased net interest income, supported by modest growth in other income delivered a 39% improvement in total income.

· Strong cost management produced a positive differential between cost growth at 10% and income growth of 39%.

· Our underlying contribution improved by 59% reflecting strong asset growth and continued high asset quality, allied with careful pricing, NIM and cost management.

· We delivered a full year Net Interest Margin (NIM) of 1.42% in the mortgage and savings business.

· Mortgage balances increased by 12% to £21.9 billion. Gross mortgage lending was 4% higher than in 2013 at £5.8 billion.

· Customer deposits grew by 6% to £22.2 billion.

· Risk-weighted assets at year end decreased by 8% following model changes agreed with the PRA in July 2014. This drove an increase in the return on risk-weighted assets to 4.8% from 3.2% in 2013.

Performance summary

Note: 2013 figures are restated. See note 39 of the financial statements for details.

CARDS

Key developments

· We were pleased to exceed our expectations of customer retention during 2014. We ended the year with higher total customer balances as a result of completing the acquisition of the second tranche of balances from MBNA and despite being constrained in terms of new business origination due to the terms of the agreement with MBNA.

· We acquired the remaining customer balances originated by MBNA since January 2013, in November 2014 for £362.7 million. This provides us with the full economic benefit of these customer balances.

· Much of our cards team effort has been dedicated to the delivery of our own credit card capability and we achieved the major milestone of issuing our own cards for the first time in November. This was initially to our own colleagues, and the project was delivered on time and within budget.

· Preparation for the migration of the acquired credit card accounts from MBNA to our own operation, TSYS, is well advanced and planned for H1 2015.

· The full public launch of our credit card business is planned for early 2015.

· We completed the sale of £39.5 million of previously charged-off balances to Arrow Global in October 2014.

2014 financial highlights

· In a year where our focus was on building our new credit card capabilities, and with constraints on new card origination, underlying contribution improved by 4%.

· The reduction in total income of £8.2 million was due largely to expected attrition of the first tranche of customer accounts and balances acquired from MBNA. In addition, there was no new card origination in November and December. Customer retention activities aimed at maintaining accounts and balances resulted in a drop in yield. Lower interest expense however, meant that 2014 credit card NIM was higher than in 2013 at 9.6%.

· Our attributable expenses increased by £2.2 million as we continued to pay MBNA for the servicing of the acquired customer accounts while investing in the build of our own capabilities. Following migration, our unit operating costs will reduce significantly.

· The improvement in impairments of £12.2 million is attributable to continued improvements in customer delinquency rates and an £8.9 million credit from the sale of already charged-off balances.

· Loans and advances to customers increased by 41% to £1,098.2 million, largely due to the transfer of a further £359.3 million of credit card balances to Virgin Money from MBNA in November 2014.

· Risk-weighted assets increased by 37% due to the increase in loans and advances on the balance sheet.

· Return on risk-weighted assets increased by 13bps reflecting the increased underlying contribution compared to average risk weighted assets for the year which included £359.3 million of additional credit card balances for only one month. 

Performance summary

Note: 2013 figures are restated. See note 39 of the financial statements for details.

CURRENT ACCOUNTS, INSURANCE AND INVESTMENTS

Key developments

· We launched our Virgin Essential Current Account to customers in Scotland and Northern Ireland in early 2014, following a successful colleague pilot in late 2013. The Virgin Essential Current Account aligns with the Government initiative on Basic Bank Accounts and has been well received by consumers. We will complete the full roll-out during 2015.

· We reaffirmed our commitment to our key fund administration partner, IFDS, through a new ten-year contract. Alongside this we agreed with State Street and IFDS a route to expanding our range of passively managed funds. Three new funds are planned for 2015.

· We developed our life insurance capabilities through a partnership with Friends Life. We launched a simple transparent life insurance product in March 2015.

· We signed a long-term strategic partnership with Ageas to distribute home and motor insurance products. We will launch these products in H2 2015.

· We signed a seven-year contract with Monitise to support the development of our digital offering in current accounts.

2014 financial highlights

· Our funds under management grew to £3.042 billion during 2014 despite a 2.1% fall in the FTSE All-Share index. This growth resulted in a 4% increase in income.

· Our ISA and Pension sales continued to perform well. We attracted new fund inflows whilst maintaining balances from our existing customers.

· Our travel insurance sales increased to 398,000, an 8.8% improvement year-on-year and the start of a recovery from our 2012 position where we withdrew from unprofitable channels.

· Our insurance income in 2013 was positively impacted by a one-off payment. Underlying income was flat year-on-year.

· Our current account balances grew by 7% in the year to £201.6 million.

· Attributable expenses are favourable due to investment stamp duty being abolished in April 2014.

· Risk-weighted assets are held against operational risk in the business unit. Operational risk-weighted assets are measured using income generated by the unit in the preceding three years. These showed a year-on-year increase of 27% due to growth in income of the business unit since 2010.

Performance summary

Note: 2013 figures are restated. See note 39 of the financial statements for details.

CENTRAL FUNCTIONS

Key developments

· We invested over £40.0 million in 2014 to improve our business capability, fully aligned with our strategy to grow the business. 98% of these initiatives were delivered on time and to budget. Costs included the opening of our new Lounges in Glasgow and London during the year.

· We successfully implemented MMR, the most significant regulatory change in the mortgage market since MCOB in 2003. All of the changes required were completed with minimal disruption to our business.

· Our programme to make products mobile enabled commenced with a travel insurance application. This mobile capability will be rolled out to other products in 2015.

· To support our strategy we invested in recruiting senior management talent. This included a new Chief Banking Officer, General Counsel, Banking Insurance & Investments Director and an Investor Relations Director.

2014 financial highlights

· Interest income and expense incurred from Treasury funding and liquidity operations is allocated to the business units.

· Other income is primarily due to gains on the sale of investment securities from within the Treasury portfolio.

· Strong business performance led to increased bonus awards in the year contributing to the 8% increase in cost.

· An increase in depreciation of £3.3 million was a further driver of central cost change in the year, as we continued to invest in our future.

· Costs also included the opening of our new lounges in Glasgow and London during the year.

Performance summary

Note: 2013 figures are restated. See note 39 of the financial statements for details.

Responsibility statement of the Directors

in respect of the Annual Financial Report

The responsibility statement below has been prepared in connection with the Company's full annual report for the year ending 31 December 2014. Certain parts thereof are not included within this announcement.

We confirm to the best of our knowledge:

· The financial statements, prepared in accordance with IFRSs as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and

· the Strategic Report and Directors' Report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

This responsibility statement was approved by the board of directors on 4 March 2014 and is signed on its behalf by:

Jayne-Anne Gadhia, Chief Executive

Lee Rochford, Chief Financial Officer

PRINCIPAL RISKS AND UNCERTAINTIES

Credit Risk

Principal risks

Virgin Money provides residential and buy-to-let mortgages and credit cards to customers across the UK. There is a risk that any adverse changes in the economic and market environment and/or the credit quality or behaviour of our borrowers results in additional impairment losses thereby reducing our profitability.

Virgin Money maintains a liquid asset portfolio and hedges exposure to interest rate risk through derivative instruments to manage liquidity and market risk. These positions are Virgin Money wholesale exposures which result in credit risk.

Mitigating actions

· Managed through risk appetite and risk limits reflected in approved credit policy. Appetite reflects low tolerance for wholesale credit losses.

· Composition and quality of portfolios monitored and reported through governance committees regularly. Performance monitored to help ensure that both composition and quality remain in line with risk appetite limits.

· Stress and scenario testing.

· Default credit limit structure for counterparties.

· Credit risk arising from derivative and from securities financing transactions mitigated by collateralising exposures on a daily basis.

Market Risk

Principal risks

Market risk is the risk that unfavourable market moves lead to a reduction in earnings or value. Virgin Money does not trade or make markets. Interest rate risk is the only material category of market risk for the Group.

Mitigating actions

· Board approved risk appetite limits and policy.

· Use of natural offsets and derivatives.

· Stress and scenario testing.

Operational Risk

Principal risks

Operational risk is the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events, including legal risk. The management of third party relationships, cybercrime and information security remain a key focus for Virgin Money. 

Mitigating actions

· Risk appetite focused on maturing the control environment and therefore managing operational risk.

· A programme of investment in security infrastructure to mitigate threats including cyber attack.

· Continued investment in and development of risk management frameworks, systems and processes.

· Monitoring of external events impacting other financial services companies to inform our stress testing.

Conduct Risk and Compliance

Principal risks

Conduct risk is the risk that our operating model, culture or actions result in unfair outcomes for customers. Compliance risk is the risk of regulatory sanction, material financial loss or reputational damage if the organisation fails to design and implement operational processes, systems and controls such that it can maintain compliance with all applicable regulatory requirements. 

Mitigating actions

· Effective and timely Board response to changes in the regulatory environment to ensure compliance is maintained.

· Customer is placed at the heart of decision-making by ensuring fair outcomes through comprehensive risk assessment and testing.

· Continued investment in and development of risk management frameworks, systems and processes.

Strategic and Financial Risk

Principal risks

Strategic risk is the risk of significant loss or damage arising from business decisions that impact the long-term interests of our stakeholders or from an inability to adapt to external developments. Financial risk is focused primarily on concentration risk. Credit concentration risk is managed for retail and wholesale credit exposures at portfolio, product and counterparty levels.

Mitigating actions

· Board focus on ensuring alignment of business development and planning with risk appetite.

· Investment in processes, systems, recruitment and training to support new business developments.

· Robust risk and project management disciplines to ensure that implementation is delivered safely.

· Active focus on asset origination and portfolio management to eliminate inappropriate concentration risk.

· Regular validation and review of models.

Liquidity and Funding Risk

Principal risks

Liquidity risk represents the inability to accommodate liability maturities and withdrawals, fund asset growth, and otherwise meet contractual obligations to make payments as they fall due. Funding risk represents the inability to raise and maintain sufficient funding in quality and quantity to support the delivery of the business plan.

Mitigating actions

· Board approved risk appetite and funding and liquidity policy defining a limit structure.

· Liquid resources maintained in adequate quantity and quality to meet estimated outflows.

· A prudent mix of funding sources is maintained with a maturity profile set in risk appetite and policy limits.

· Stress and scenario testing.

Credit risk portfolio in 2014

Overview

· Impairment provisions decreased 12% to £30.6 million in the year to 31 December 2014.

· Impairment provisions as a percentage of loans and advances to customers reduced to 0.13% as at 31 December 2014 compared to 0.17% at 31 December 2013.

The table below shows our total credit exposures.

Maximum credit exposure

The maximum credit risk exposure of the Group in the event of other parties failing to perform their obligations is detailed below. No account is taken of any collateral held, other credit enhancements or provisions for impairment.

The maximum credit risk exposure for off-balance sheet items relates to applications that have been approved and have not yet been drawn by the customer and undrawn loan commitments (pipeline). These commitments represent agreements to lend in the future and can be cancelled unconditionally, subject to notice requirements.

Loans and advances to customers comprise of:

The mortgage portfolio has grown by 12% during 2014. In particular, buy-to-let balances have increased by £764.3million (32%) over the reporting period, reflecting Virgin Money's appetite and the growth of the buy-to-let market.

Secured impairment allowance has remained stable since 2013. There has been a reduction in the proportion of impairment provisions to gross loans and advances, primarily reflective of positive house price movements, helped by improved arrears performance. The decrease in unsecured loans impairment allowance is primarily a result of impaired arrears performance and reflects the transfer of less well-seasoned assets which hold lower provisions.

Credit quality of assets

Loans and receivables

Virgin Money defines three classifications of credit quality (low risk, medium risk and higher risk) for all credit exposures. These are based on the following criteria for the different credit risk exposure types.

Secured credit exposures are segmented according to the credit quality classification and a point in time PD. The point in time PD is an internal parameter used within our AIRB capital models which aims to estimate the probability of default over the next 12 months based on account characteristics and customer behavioural data. Default occurs where a borrower has missed six months of mortgage repayments or the borrower is deemed to be unlikely to repay their loan. Exposures are categorised as:

· higher risk where assets are past due or have a point in time PD greater than 2%;

· medium risk where assets are not past due and have a PD greater than 0.8% but less than or equal to 2%; and

· low risk where assets are not past due and have a PD of less than or equal to 0.8%.

Unsecured exposures are categorised as:

· higher risk where assets are past due;

· medium risk where assets are currently not past due and benefiting from a forbearance solution; and

· low risk where assets are neither past due nor in forbearance.

Wholesale credit exposures are assessed by reference to credit rating. All of Virgin Money's wholesale exposures are investment grade and therefore classified as low risk.

Further asset quality categorisation is disclosed below, which reflects the impairment status of assets.

No wholesale credit exposures are past due or impaired as at 31 December 2014 or 2013.

The categorisation of credit risk is detailed in the table below:

The criteria that the Group use to determine that there is objective evidence of an impairment loss are disclosed on page 167. All loans where specific circumstances indicate that a loss is likely to be incurred, for example mortgage accounts which have entered possession or loans where fraud has been confirmed, are individually assessed for impairment by reviewing expected future cash flows including those that could arise from the realisation of security.

Loans and advances which are neither past due nor impaired

The table below shows the details of the credit quality for neither past due nor impaired loans.

Loans and advances which are past due and not impaired

Mortgages past due and not impaired can also be analysed by overdue term as shown below. These assets represent 0.9% of secured balances (2013: 1.0%).

1 Assets categorised as past due and not impaired are those where the expected recoverable amount exceeds the carrying amount.

1. Impaired assets have been restated to reflect the change in definition as noted on page 161.

The tables below show the movement of impaired loan balances during 2014 and 2013.

1. Impaired assets have been restated to reflect the change in definition as noted on page 161.

Total impaired assets on secured loans and advances to customers have fallen during the period principally driven by increases in property values, reducing the loan-to-value below the threshold for impaired status. Write offs remain low as a result of the small number of customers whose properties are taken into possession and sold.

An analysis of impaired assets by overdue term and by those assets where the borrower's property is in possession is provided in the table below. These assets represent 0.3% of secured balances as at 31 December 2014 (2013: 0.6%).