Virgin Money to raise payouts to investors

VIRGIN MONEY has promised to boost investor payouts after its profits soared on the back of rising interest rates.

The UK’S sixth largest lender posted a 40pc increase in pre-tax profits to £595m for the year.

The company said it would pay a dividend of 7.5p per share and buy back an additional £50m of stock on top of £75m announced in June.

Shares in the London-listed bank jumped 15pc to 167p following the announcement, valuing it at £2.3bn.

The business, which was created in 2018 following a merger with FTSE 250 rival CYBG, also set aside £52m to cover bad loans, reflecting the gloomy economic outlook, but said there were few signs of credit concerns so far.

David Duffy, chief executive, said: “We’re not seeing any significant signs of stress in our portfolios yet. I think it’s inevitable that you will see some stress, but we see that as returning to a more normal cycle of stress.” While rising interest rates aimed at taming inflation have the effect of boosting bank profits, they hit homeowners through higher mortgage payments. Inflation is also adding to pressure on finances. Mr Duffy said customer spending on energy bills was up 57pc and grocery spend had jumped 16pc this year. Virgin has also seen a small increase in credit card spending on essentials.

The business benefited from customers taking out more credit cards to help with the cost of living crisis this year.

Mr Duffy added: “We are aware that some customers will have to make difficult decisions, and we are proactively offering them help and support.”

The bank boosted staff pay, agreeing salary increases of 9pc to 11pc. Goodbody analysts said: “This is a broadly positive update from Virgin Money and should be well-received by the market.”

Virgin Money’s asset quality is likely to come increasingly into focus in 2023 as the economic outlook deteriorates.