(Reuters) – Lender Virgin Money has set aside 726 million pounds ($992.59 million) to protect its balance sheet from potential loan losses, after a “modest” increase in customers needing additional support after exiting pandemic payment holidays.

The UK’s sixth-largest lender, set up to challenge the dominance of bigger British banks, said on Tuesday it had granted Mortgage payment holidays on 12.1 billion pounds of loans as at December 31, equivalent to around 21% of balances, compared with 11.9 billion pounds at its full-year.

It had said it would set aside 735 million pounds last year.

“Recent further restrictions across the UK as a result of record infection levels are likely to delay the pace of normalised economic and transaction activity,” the company said.

“As a consequence, VMUK continues to adopt a cautious view on economic assumptions and this is reflected in coverage levels, underwriting standards and liquidity levels.”

Shares were trading 2.6% higher at 135.4 pence by 0823 GMT.

Virgin Money also posted a 0.3% fall in the size of its loan book to 72.2 billion pounds during its first quarter, as fresh coronavirus restrictions put pressure on household borrowing.

However, business lending was 0.1% higher in the three months to Dec. 31, with government-backed lending via the Bounce Back Loan scheme up 14% to 923 million pounds and lending via larger Coronavirus Business Interruption Scheme up 19% to 422 million pounds.

In addition to subdued retail lending activities, the bank has also been hit by near-zero interest rates set by the central bank last year to reboot a coronavirus-hit economy. Net interest margin (NIM) stagnated at 1.52% during the three-month period.

Virgin Money, which serves 6.4 million customers across the UK, said that NIM in the current year would be broadly flat. It said it turned a statutory profit in the first quarter after a 141 million pound loss in its last fiscal year.

(Reporting by Muvija M in Bengaluru, editing by Sinead Cruise)