Virgin Money alive to regional property market weaknesses

Profits at Virgin Money jumped in the first half of the year, but the bank sounded a note of caution on the UK housing market.

Pre-tax profits rose 32% to £123.8 million in the six months to June 30 with gross mortgage lending coming in at £4.3 billion, taking its share of the market to 3.5%.

“Despite uncertainty relating to Brexit, we continue to experience a strong UK economy,” the firm said.

“The UK housing market is expected to remain resilient; however, in the near term there may be some areas of weakness to be navigated.

“We remain vigilant about the potential for certain regions to see house price weakness and will continue to manage this through strict application of our existing lending policies and risk appetite.”

Virgin Money said in April it would also keep a close eye on rising consumer debt levels after credit card balances jumped 8% in the first quarter.

In the first half of the year, credit card balances increased to £2.8bn, 13% higher than last year.

It comes after the Bank of England warned banks to avoid a “spiral of complacency” when lending to consumers.

Despite the upbeat tone, shares in the firm moved lower yesterday.

“Looking at the financial summary highlights there did not appear to be anything in particular to spook the market, but as is often the case when reading in more depth investors will have noticed guidance for net interest margin had been lowered,” Graham Spooner, investment research analyst at the Share Centre, said.

“There is also the ongoing concern for the sector of consumer credit, which has recently been highlighted by the Bank of England, along with other concerns such as the housing market, credit card promotions and Brexit.”