4th Nov 2021 10:33
(Alliance News) - Virgin Money UK PLC said Thursday it expects to return to an annual profit in financial 2021, as the lender progresses its strategy of turning into a digital bank.
Shares in the midcap lender were down 4.5% in London on Thursday morning at 186.95 pence each, the worst FTSE 250 performer.
For the year ended September 30, the bank expects to report pretax profit of GBP417 million, swinging from a GBP168 million loss the year before.
Underlying net interest income is expected to rise 4.4% to GBP1.41 billion from GBP1.35 billion, taking total underlying operating income to GBP1.57 billion, up 1.9% from GBP1.54 billion the year before.
Chief Executive David Duffy said: "We performed very strongly in financial 2021, with an expected return to statutory profit before tax underpinned by significant underlying profit growth. We increased our net interest margin, reduced costs, improved impairments and delivered a strong capital progression which enabled the proposed reinstatement of a dividend."
The bank's net interest margin improved to 1.62% from 1.56%.
Virgin Money's underlying cost-to-income also improved, falling to 57% from 59%.
The bank's customer loan book ended September 30 at GBP72.00 billion, slipping from GBP72.46 billion at the same point the year before. Business loans fell 5.3%, while Mortgages were slightly lower, partially offset by Personal lending up 3.8%.
Virgin Money's CET1 ratio is expected to close September 30 at 14.4%, up from 12.2% a year earlier.
"Our accelerated digital strategy will result in new propositions, including a digital wallet, and will deliver efficiency and agility improvements. The combination of these factors will help us to become a growth-oriented digital bank that offers a best-in-class experience and unique loyalty rewards for customers, and delivers double-digit returns for shareholders," Duffy added.
Looking ahead, the bank is targeting above market lending growth across Business and Unsecured lending, whilst maintaining Mortgage market share. It is also looking for "modest mix-driven" net interest margin growth but expects its non-interest income to rise as a proportion of total income.
Virgin Money is targeting gross savings of GBP175 million over the next 3 years, brining its cost-to-income ratio below 50% in financial 2024.
By Paul McGowan; [email protected]
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