5th May 2021 10:43
(Alliance News) - Virgin Money UK PLC on Wednesday reported a swing to profit for the first half of its financial year, due to a reduction in credit loss provisions and despite a decline in income due restrictions on customer activity.
Shares in the Glasgow-based lender were 4.9% lower at 190.90 pence on Wednesday in London.
For the six months ended March 31, Virgin Money posted a pretax profit of GBP72 million, swinging from a loss of GBP7 million in the same period a year before. Meanwhile, underlying profit more than doubled year-on-year to GBP245 million from GBP120 million.
The group's profit performance was helped by an 84% reduction in impairment losses on credit exposure to GBP38 million from GBP232 million a year prior.
However, underlying net interest income was down 4% at GBP677 million from GBP702 million, as net interest margin worsened to 1.56% from 1.62%, though this marked an improvement from the 1.49% posted for the second half of the prior financial year.
Non-interest income fell 43% year-on-year to GBP66 million from GBP115 million, reflecting lower activity levels due to lockdown restrictions and the non-repeat of gilt sales made the prior year.
As a result, total income declined 9% year-on-year to GBP743 million from GBP817 million.
Total customer lending dipped 0.3% over the period to GBP72.21 billion from GBP72.46 billion from the end of September, driven by a contraction in the Personal lending book, while Business and Mortgage lending remained flat.
Customer deposits rose 1.5% to GBP68.54 billion as at March 31 from GBP67.51 billion at September 30.
Virgin Money's CET1 ratio improved to 13.2% from 12.4% the year before, as its risk-weighted assets were reduced by 1.0% to GBP24.15 billion at the end of March from GBP24.40 billion at September 30.
Looking ahead, for the year as a whole, Virgin Money expects net interest margin to be around 160 basis points, while underlying operating expenses is set to be no higher than GBP890 million for the year.
In addition, the CET1 ratio is set to be above 13% for the full year.
"Virgin Money had a strong first half. We doubled underlying profit compared to last year and returned to statutory profit. The quality of our loan book remained resilient in the period, and we've continued to support customers and look after our colleagues and communities, while safeguarding the bank," said Chief Executive Officer David Duffy.
"We are cautiously optimistic about the improving outlook as the impact of the vaccination programme in the UK delivers positive revisions to economic expectations. We're continuing to manage through what is still an uncertain economic backdrop, but the bank is well placed, with a strong balance sheet, and through ongoing strategic delivery we have a clear path to long-term, improved sustainable returns," Duffy added.
By Dayo Laniyan; [email protected]
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