* PPI provision falls within estimated range
* Shares jump as much as 24%
* Company suspends dividend, posts lower profit
(Adds company, analyst comments, shares, background)
By Pushkala Aripaka and Muvija M
Nov 28 (Reuters) - Shares in Virgin Money UK leapt
as much as 24% on Thursday after the British bank said it
believed the worst of an industry-wide insurance scandal was
behind it.
That helped to overshadow a drop in annual profit and the
company's decision to suspend its dividend payout.
The owner of Clydesdale and Yorkshire Bank said it had set
aside 385 million pounds ($494 million) in the last quarter to
cover costs related the mis-selling of payment protection
insurance (PPI) - a scandal that has cost the industry billions
and continues to unsettle investors worried about more charges.
That was within the 300-450 million pound range Virgin Money
UK forecast in September, when it reported an "unprecedented
volume" of claims for compensation ahead of an August deadline.
"We are going to be processing claims from now through to
the end of next summer, but we think we have got a pretty good
handle on the costs," Chief Financial Officer Ian Smith said on
a call with journalists.
"I can't say that there's not going to be any more
provisions, but I am very confident the risk of a scale charge
in relation to PPI is completely behind us."
Virgin Money UK, formerly known as CYBG, became Britain's
sixth-biggest lender after it bought Virgin Money last year. It
is betting on the high profile brand of Richard Branson's Virgin
empire and growth in business banking to challenge bigger rivals
such as Lloyds, RBS and Barclays.
In its first full results as the merged entity, the bank
said underlying pretax profit dropped 7% to 539 million pounds
in the year ended Sept. 30, below analysts' average forecast of
544 million.
At 0920 GMT, Virgin Money UK shares were up 19.8% at 171.25
pence, topping the UK midcap index and on course to add
about 500 million pounds to the company's market value.
That was despite the lender cancelling its dividend.
"The board, incorporating feedback from our major
shareholders, believes this is the right short-term action to
enable us to deliver on our longer-term strategy and targets,"
the company said.
JP Morgan called the move "sensible", adding it helped the
bank to report a common equity tier one capital ratio - a key
measure of financial strength - of 13.3%, higher than analysts'
forecast of 13%.
($1 = 0.7794 pounds)
(Reporting by Pushkala Aripaka and Muvija M in Bengaluru;
Editing by Shounak Dasgupta and Mark Potter)
Barclays (BARC)
Lloyds (LLOY)