23rd Nov 2023 09:34
(Alliance News) - Virgin Money UK PLC on Thursday reported modest topline growth in its recent financial year, but a sharp fall in profit, prompting the lender to take a hatchet to its dividend.
The Newcastle, England-based bank said net interest income rose to GBP1.69 billion in the year that ended September 30 from GBP1.58 billion the year before, while non-interest income was unchanged at GBP140 million. Net interest margin improved to 1.91% from 1.85%.
However, pretax profit dropped to GBP345 million from GBP595 million, mostly due to higher credit impairment losses, which Virgin Money hiked to GBP309 million from GBP52 million. The bank said this reflects "prudent macroeconomics and provision build from higher modelled" expected credit loss. "Credit quality remains robust with low arrears," Virgin Money said.
The company declared a final dividend of 2 pence, down from 7.5p a year before, bringing the annual total to 5.3p, little more than half of the 10p payout in financial 2022.
More positively, Virgin Money announced a further GBP150 million share buyback programme, which brings total shareholder distributions for the year to GBP272 million, up around 2% from the prior year. The new buyback, to be run by Goldman Sachs International, will start on Thursday and end by May 16 next year. It recently completed the GBP50 million buyback that it had announced in August.
"With the momentum we carry into 2024, we are confident in the outlook for our business and we expect to deliver around GBP800 million in distributions to our investors by the end of the three-year period ending in 2024," Virgin Money said.
The bank said its CET1 ratio remained strong at 14.7%, edging down from 15.0% a year before.
Looking ahead, Virgin Money expects a net interest margin of 190-195 basis points in financial 2024, versus 191 points in financial 2023, and expects to deliver an underlying return on tangible equity of around 10% or a statutory RoTE of around 8%. Statutory RoTE was 3.9% in the recent year, down from 10.3% in financial 2022.
Virgin Money shares were down 2.5% at 153.10p on Thursday morning in London.
By Tom Waite, Alliance News editor
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