Bank defers SME lending

Virgin Money sees ‘no customer change’ post-Brexit


Virgin flag 2
Flying high: Virgin in strong position (pic by Terry Murden)

Virgin Money said it is in a strong position to deal with a period of post-referendum uncertainty and has experienced no evidence of changes in customer behaviour since the vote to the leave the EU.

However, it has decided that it is “prudent to defer our SME and unsecured lending plans and focus investment on enhancing our digital capability.”

The Edinburgh and Newcastle based business expects some erosion to margins if, as anticipated by market analysts, there is some softening in the mortgage market, a further sustained lowering of interest rates and a rise in unemployment.

Delivering figures for the first six months, chief executive Jayne-Anne Gadhia, said the company has had an “excellent first half”.

She said: “We continued to grow the business strongly and have delivered a 53% increase in underlying profit as a result of our increased share of the mortgage market and the continued success of our credit card business.

“Since the vote to leave the EU we have experienced continued strong customer demand and no evidence of changes in customer behaviour. Virgin Money is in a strong position to deal with a period of post-referendum uncertainty as a low-risk retail bank with a high-quality asset base and unburdened by legacy conduct issues.

“We remain on track to achieve our target of £3 billion of high-quality credit card balances by the end of 2017 and remain focused on maintaining the high quality of our mortgage business. We look to the future with confidence and will continue to drive our customer-focused strategy of growth, quality and returns.”

Virgin Money said it continued to perform strongly in the first half of the year with growth in mortgages, credit cards and savings, as well as earnings performing in line with expectations.

It has a strong capital base and says it is “well placed” to navigate an uncertain economic outlook and a lower for longer interest rate environment.

anarchy Virgin“Against this backdrop we will continue to protect our strong capital position and fund growth in the most cost efficient way, optimising volume and asset mix. We will continue to ensure we grow assets at the right price and quality,” it said in a statement.

It has no exposure to commercial property, and is comprised of 82% residential and 18% buy-to-let mortgages. The average loan-to-value of the retail mortgage portfolio was 55.4%.

The company entered the second half of the year with a strong mortgage pipeline and expects to achieve a market share of annual gross mortgage lending at the higher end of its 3% to 3.5% target range.

The credit card business continued to grow strongly and is expected to reach target of £3 billion of credit card balances by the end of 2017.


  • Underlying profit before tax increased by 53% to £101.8 million, from £66.4 million in H1 2015
  • Underlying net interest margin of 1.60%, in line with previous guidance.
  • Underlying return on tangible equity improved to 12.2% from 9.5%
  • Underlying cost:income ratio improved to 58.8%, from 68.3%
  • Statutory profit before tax was £93.7 million in H1 2016, compared to £55 million
  • The board has declared an interim dividend of 1.6p per share
    • Strong capital base, with a Common Equity Tier 1 ratio of 15.3%
      • Mortgage balances increased 9% to £27.7 billion

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