NORTH-EAST based bank Virgin Money has reported a better-than expected rise in profits ahead of its merger with Clydesdale and Yorkshire Banking Group (CYBG).

For the six months ended June 30, underlying pre-tax profit rose 10% to £141.6m, up from £128.6m. Net interest income was up 5.1% to £303.1m as compared to £288.5m in the same six months in 2017.

The figures come ahead of a proposed merger with the owner of the Clydesdale Bank, Yorkshire Bank and B brands.

The takeover values the bank, which is backed by Richard Branson, at £1.7bn, but the deal is likely to lead to more than 1,500 job losses.

CYBG’s David Duffy will stay on as chief executive, leaving Virgin Money boss Jayne-Anne Gadhia to serve in a consultancy role as his senior adviser.

Mr Duffy has previously pledged there would be “no major changes” to operations at the Gosforth offices for at least three years and said that CYBG sees the Newcastle operation as a “major advantage” for the combined bank.

The job losses will amount to around one in six current jobs, but CYBG has said that most of the redundancies would be in senior management and it believes many will happen naturally over the next three years.

The new group, which plans to keep the Virgin name for its retail banking, will have its head office in Glasgow, putting a question mark against the long-term future of Virgin Money’s Newcastle site which employs 2,100 staff.

CYBG has given assurances to maintain a significant presence at Virgin’s North-East offices, where it currently employs 2,100 people, for the next three years only.

Ms Gadhia said: “The recommended offer made by CYBG for Virgin Money in June reflects confidence in our strategy, our track record of delivery and the complementary models of the two businesses, and will accelerate the delivery of our strategic objectives.”

Ms Gadhia added that the bank had reduced its gender pay gap by 9% over the last year and “remain committed to achieving 50:50 gender balance throughout the company by the end of 2020”.

Gary Greenwood, research analyst at Shore Capital, said it was significant that Virgin Money had downgraded its forecast for its net interest margin, a measure of how successful a bank is at investing.

“Had it not been for the fact that Virgin Money is currently in the process of being acquired by CYBG, then we would have expected this update to have catalysed a negative share price reaction,” he said.

“However, with the shares currently trading around 5% below the implied CYBG offer valuation of 407p, we believe there is a degree of support to the stock.”

Sir Richard Branson, meanwhile, is expected to rake in royalties for CYBG's use of the Virgin brand - at a minimum fee of £15m annually after the first four years that the combined group is operating.