Virgin Money UK PLC (Holding Company) Clydesdale Bank PLC (Lead Bank)

The stable outlook reflects our view that the bank will maintain a sound capital position, deliver statutory profit for full-year 2022, and maintain strong asset quality metrics in line with the broader economic environment and peers. We could lower the ratings if the U.K.'s economic recovery were materially slower than expected, leading to a potential deterioration in asset quality and earnings. We could also lower the ratings if VMUK's risk appetite became more aggressive than we currently anticipate. We could raise the ratings over our two-year outlook horizon if: The digital strategy implementation succeeded in building and modestly diversifying the franchise, improving cost efficiency, and delivering strong and consistent profitability relative to peers; Capital levels remained at or above current

...We anticipate capital stability. Virgin Money UK PLC (VMUK) reported a 15.2% common equity Tier 1 (CET1) ratio at first quarter December 2021 (for financial 2021 ending Sept. 30, 2021 it was 14.9%). We expect VMUK to maintain its CET1 ratio, given that it has no incremental issuances planned for 2022 and recognizing its planned balance sheet growth. We expect our risk-adjusted capital (RAC) ratio will be 9.5%-10.0% through year-end 2023. VMUK is implementing its digital strategy to build its franchise and drive efficiencies. The company is seeking to build on its solid market position through its digital strategy by focusing on its business banking and consumer lending. It wants to accelerate the take up of its digital offerings, as well as digitize its internal processes. This strategy is aimed at driving growth and productivity, as well as improving cost efficiencies over the medium term (from 2023-2024). VMUK has a smaller and less diverse franchise than its larger peers, as well as...

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