Rise in lending leads to profits boost for bank
PROFITS at Virgin Money have risen on the back of strong growth in unsecured lending, including new credit card customers.
The Newcastle-based challenger bank said underlying pre-tax profit for the six months to March 31 had risen 58% to £388m, up from £245m in the same period the year before, though a fall from £556m in the period preceding it.
In its interim financial results, Virgin Money said it had attracted new customers to its current accounts via attractive switching offers and that it now held about 8% of the UK current account market.
Unsecured lending grew 7% to £5.8bn driven by record credit card sales of about 175,000.
The bank has added “instalment credit” capability to its credit cards allowing customers to access ‘buy now, pay later’ features within the mobile app. The growth in unsecured lending was offset by a reduction in mortgage and business lending. Total customer deposits reduced by 3.7% to £64.4bn which the bank said reflected “careful management” and mortgage balances reduced by 0.5% to £57.8bn. Business lending reduced 2.5% to £8.3bn.
Virgin said the mortgage market remained competitive and pointed to slower demand post Stamp Duty holiday in the first half of the financial year. Elsewhere, the bank said it had seen few incidences of fraud associated with the Government’s Bounce Back Loans and that some business customers had chosen to pay back in full while others were making monthly payments.
David Duffy, chief executive officer: “We’ve made good progress against our strategy, while delivering a significant increase in profit. We have positive momentum in attracting new customers to Virgin Money through record credit card sales, good growth in personal current account openings and a strong uptake of our new digital fee-free business current account.
“We have upgraded our net interest margin guidance given strong growth in unsecured lending, combined with the rising interest rate environment. Looking ahead, while
the macroeconomic outlook is uncertain and there are increased cost pressures on consumers, we remain prudently provisioned and are confident in the quality of our loan portfolio.”
Mr Duffy also said: “Our strategy remains the right one against a macroeconomic backdrop that has become more uncertain over the course of the six months.
“Following a period of strong recovery in gross domestic product as Covid restrictions were lifted and consumer spending levels improved, the impact of higher inflation has seen expectations for further growth start to temper. As a domestic UK bank, the Group doesn’t have direct lending exposure in Ukraine or Russia, but we are monitoring carefully for any second-order impacts arising from the conflict, particularly upon inflationary pressures in the UK.”