Virgin Money profit increases 37% with strong growth in mortgage, credit cards
(31 July 2015 – United Kingdom) Virgin Money announced increased underlying profit before tax of 37 percent to £81.8 million (A$173.8 million) for the first half of 2015.
Statutory profit before tax was £55.0 million in H1 2015, compared to £6.7 million the same period last year.
Underlying net interest margin grew by 22 basis points to 1.65 percent, from 1.43 percent in the first half of 2014.
Underlying cost to income ratio improved to 62.2 percent, from 66.7 percent in H1 2014.
Underlying return on tangible equity grew by 2.6 percentage points to 10.2 percent, from 7.6 percent in H1 2014.
Virgin Money said it had continued growth in mortgage, credit card and retail deposit balances, with mortgage balances increasing to £23.6 billion, up 8 percent from FY 2014.
Credit card balances stood at £1.1 billion at H1 2015, after the successful migration of the credit card business in March 2015.
Retail deposit balances were up 3 percent to £22.8 billion, from FY 2014.
Virgin Money chief executive Jayne-Anne Gadhia, said; “I am pleased to report a 37 percent increase in underlying profit for the first half of 2015.
“This was driven by balance sheet growth, strong improvement in our net interest margin and effective cost management.
“We continued to increase our share of the mortgage market while protecting the quality of our book.
Gross mortgage lending increased by 44 percent to £3.6 billion in the first half of the year, representing a 3.8 percent market share of gross lending and a 20.5 percent share of net lending to the end of May,” Gadhia said.
“In our credit card business we successfully completed the migration of the credit cards acquired from MBNA to our own platform and launched our new range of cards to customers.
“This puts us in a strong position to grow our credit card business to our target of £3 billion of credit card balances by the end of 2018.
“We remain focused not only on delivering growth but also generating sustainable returns to shareholders.
“As such, we are pleased to announce that, after taking into consideration our strong performance in the first half of the year and the growth prospects of the company, the Board has declared an interim dividend of 1.4 pence per share.”
Virgin Money has performed strongly in the first half of the year with mortgage growth, net interest margin and RoTE all performing ahead of expectations.
Competition in the mortgage market, reflected in asset spread compression, remains a headwind in the second half of the year.
The company said it would protect spread by a continued focus on managing volumes.
The credit card business is now fully operational on Virgin Money’s own platform and new business has been strong since the successful migration.
This means we are well positioned to meet the target of £3 billion of credit card balances by the end of 2018.
“We remain confident that will deliver a full-year net interest margin slightly ahead of our guidance of up to 160 basis points in 2015.
“Cost flexibility remains an opportunity to drive returns in the medium term. We will continue to deliver on our cost efficiency targets and are well positioned to achieve a cost to income ratio of no more than 50 percent as planned in 2017.
Virgin Money said the unexpected addition of the bank surcharge is expected to slow its progress to mid-teens returns on tangible equity and we now expect to achieve this by the end of 2017.
Current account, digital and SME development give us significant potential and opportunity to drive the growth of the business.
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