Darker picture for Virgin has sent shares lower (pic: Terry Murden)

Virgin Money could be heading into bid target territory according to Shore Capital after another downward lurch in its trading performance.

Rising impairment charges for bad debts and higher investment cost saw Glasgow and Newcastle based bank post lower pre-profits of £236m for the first half against £315m a year earlier.

Provision for bad debt surged to £144m from £21m, as Virgin updated economic assumptions with some signs of a modest increase in arrears on customer credit cards.

Higher interest rates drove an improvement in income to £933m, up 10%, while the bank’s net interest margin – the difference between what it charges for loans and pays on deposits – grew by eight basis points to 1.91%.

The figure sent the shares down by almost 6% to 144p.

An analyst at Shore Capital said: “Our last published fair value of 320p…implies the shares are worth more than double the current price. 

“While today’s numbers are mixed, we do not think the very low valuation can be overlooked and think VMUK could be a bid target if its share price doesn’t recover soon.”