1st Feb 2022 09:00
(Alliance News) - Virgin Money UK PLC on Tuesday raised its guidance for its annual net interest margin, despite posting a drop in lending over the first quarter.
For the three months ended December 31, customer deposits dropped 2.0% to GBP65.50 billion from GBP66.87 billion the previous quarter, due to a fall in more expensive term deposit balances. On an annual basis, the Newcastle-upon-Tyne, England-based lender's deposits fell 8.2%.
The total loan book declined 0.5% quarterly to GBP71.65 billion from GBP72.00 billion, partly as a result of business lending dropping 2.2% to GB8.23 billion, due to an expected reduction in business-as-usual activities and government-scheme volumes.
In addition, mortgage lending was down 0.5% at GBP57.79 billion, as a result of lower market demand following changes to the Stamp Duty Land Tax, and a more competitive environment.
On a year-on-year basis, overall customer lending dropped 1.9%, while mortgage lending was down 2.2% and business lending suffered a 9.0% decline.
However, Virgin Money's net interest margin for the period rose to 177 basis points from 170 the prior quarter, attributed to a higher yielding lending mix, and higher hedge contributions.
Looking ahead, the company has raised its guidance for the year ending September 30 for net interest margin to 1.75% from 1.70%.
Virgin Money said it is continuing to work through its digital growth strategy, with the closure of a further 28 stores since the end of the prior financial year, leaving the group's store footprint at 134.
From the 2022 financial year to 2024, Virgin Money retained its expectations of incurring GBP275 million in restructuring charges, with half of that to be recognised in the 2022 financial year.
"Virgin Money's performance in the first quarter has been strong. Our balance sheet is performing well, asset quality remains robust and we have increased guidance on net interest margin for 2022. We are optimistic about the pace of recovery of the UK economy based on growing consumer and business confidence, underpinned by lower unemployment," said Chief Executive Officer David Duffy.
"We've continued our strong delivery of new digital propositions, including the launch of our fee-free digital business current account and innovative new unsecured lending products, with more to come later this year," Duffy added.
Shares in Virgin Money were up 1.0% at 191.80 pence on Tuesday in London.
By Dayo Laniyan; [email protected]
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