Why the Virgin Money UK (ASX:VUK) share price is sinking 6% today

This bank's shares are deep in the red today…

| More on:
Woman sits at laptop looking confused and stressed

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Virgin Money UK CDI (ASX: VUK) share price has been a particularly poor performer on Friday.

In afternoon trade, the UK bank's shares are down 6% to $3.79.

Why is the Virgin Money UK share price tumbling?

There appear to have been a couple of catalysts for the weakness in the Virgin Money UK share price on Friday.

One is broad market weakness, which is being felt more than most in the banking sector. For example, the Commonwealth Bank of Australia (ASX: CBA) share price is down 4% at the time of writing.

Another potential catalyst for the Virgin Money UK share price weakness could be the release of an announcement after the market close on Thursday.

What did Virgin Money UK announce?

According to the release, Virgin Money UK has decided to accelerate its digital strategy in order to enable greater efficiency and drive up levels of digitisation across the bank. This is with the aim of further developing a strong, scalable platform for future growth.

This plan is going to come at a cost, though. The release explains that restructuring charges for FY 2021 are now expected to be ~GBP145 million in total with an additional ~GBP45 million booked in the fourth quarter.

Where do the new charges come from?

Part of the strategy will see the bank close almost a fifth of its branches in the coming months. Virgin Money UK has identified 31 stores out of the 162 in its network which will be closed. This is expected to cost ~GBP25 million.

The bank will also be embracing the work from home initiative. This will result in lower office space requirements, with infrastructure and office hubs re-purposed to fit new ways of working.

After applying valuation adjustments and including other operating model changes, the bank expects to incur a ~GBP20 million restructuring charge in the fourth quarter from these changes.

However, management believes these costs will be worth it in the long run.

It explained: "The Group's digital strategy will further develop a strong, scalable platform for future growth. In the near term, cost savings from improved productivity delivered by Virgin Money UK's digital initiatives will be reinvested into the business to further accelerate the pace of platform development. Virgin Money UK will also leverage the capabilities of its key strategic partnerships, such as those announced with Global Payments and Capita, to deliver additional features and differentiated propositions for customers."

The Virgin Money UK share price is up 61% in 2021 despite recent weakness.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Share Fallers

Frustrated stock trader screaming while looking at mobile phone, symbolising a falling share price.
Share Fallers

Why Coronado Global, Genesis Minerals, Monash IVF, and Platinum shares are sinking today

These shares are starting the week in the red. But why?

Read more »

A man sits in despair at his computer with his hands either side of his head, staring into the screen with a pained and anguished look on his face, in a home office setting.
Share Fallers

Why Dateline, DroneShield, Ora Banda, and Pilbara Minerals shares are dropping today

These shares are ending the week in the red. But why?

Read more »

Frustrated stock trader screaming while looking at mobile phone, symbolising a falling share price.
Share Fallers

Why Qantas, Resimac, Tyro, and Soul Patts shares are falling today

These shares are having a tough session today. But why?

Read more »

a man weraing a suit sits nervously at his laptop computer biting into his clenched hand with nerves, and perhaps fear.
Share Fallers

Why Betr, Evolution, NIB, and West African Resources shares are falling today

These shares are having a tough time on hump day. But why?

Read more »

A young woman holds an open book over her head with a round mouthed expression as if to say oops as she looks at her computer screen in a home office setting with a plant on the desk and shelves of books in the background.
Share Fallers

Why Elders, IDP Education, Life360, and Pilbara Minerals shares are falling today

Let's see why investors are selling these shares.

Read more »

a woman holds her hands to her temples as she sits in front of a computer screen with a concerned look on her face.
Share Fallers

The 5 worst performing ASX 200 shares in May unmasked

These five ASX 200 shares got smashed in May. But why?

Read more »

Disappointed man with his head on his hand looking at a falling share price his a laptop.
Share Fallers

Why Brazilian Rare Earths, Mineral Resources, Pilbara Minerals, and Syrah shares are falling

Why are these shares starting the week in the red?

Read more »

A male investor wearing a blue shirt looks off to the side with a miffed look on his face as the share price declines.
Share Fallers

Why Brainchip, Findi, Lottery Corp, and REA shares are falling today

These shares are ending the week in the red. But why?

Read more »