Virgin Money back in profit amid ‘strong momentum’
Back in black: profits have risen at Virgin Money (pic: Terry Murden)
Virgin Money expects a strong recovery in underlying profit and will reinstate its dividend.
The bank says underlying profit before tax will soar by 546% to £801m thanks to “strong financial momentum”.
Pretax profit for the year ended 30 September is anticipated to be £417m compared with a reported loss of £168m for the same period a year earlier.
Business lending fell 5% to £8.5bn as business activity was “subdued” while personal lending grew 4% as the economy recovered from lockdown restrictions.
The company is targeting gross cost savings of around £175m over the next three years, it said. Around 50% of these savings will be reinvested.
The board plans to declare a final dividend of 1p.
Overall, the programme will see an acceleration of investment into FY22, where costs are now expected to be broadly stable, before the additional efficiency savings drive cost reductions out to FY24.
The group expects to deliver a cost: income ratio of <50% by FY24.
In order to deliver these savings, the group will also be investing an additional c.£275m, which will be taken as restructuring charges across FY22-24 with around half the total amount taken in year FY22. The group expects its effective tax rate to increase towards low 20’s by FY24.
Releasing an update on trade and its progress on its digital transformation, David Duffy, chief executive, said: “We performed very strongly in FY21, 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.
“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.”