UK lender Virgin Money has said credit quality remains “robust” despite deterioration in the economy and customers having “difficult decisions” to make.
At the same time, the bank noted that with inflation hitting consumers’ pockets, spending on essentials jumped this year. Chief executive David Duffy said spending on groceries rose around 60 per cent, and energy bill spending was up about 57 per cent.
“While we have solid credit quality across our lending, we are aware that some customers will have to make difficult decisions in this environment,” he said.
His comments came as the bank, which operates under the Virgin Money, Clydesdale Bank and Yorkshire Bank brands, reported full-year results.
Total operating income for the year ending September 30 rose 11 per cent to £1.8bn, in line with analysts’ expectations. Like other UK lenders, that was driven by rising interest rates, which hit 3 per cent at the start of November.
Virgin’s net interest margin, the difference between the interest it receives on its loans and the rate it pays for deposits, rose to 1.85 per cent from 1.62 per cent in 2021.
Statutory pre-tax profits increased 40 per cent to £595mn, ahead of expectations of £578mn. Impairments for bad loans were £52mn, a swing from a release of £131mn taken in 2021 for the coronavirus pandemic but slightly shallower than analyst estimates of £79mn.
In its guidance for the year ahead, Virgin said that it expects its net interest margin to rise again.
The lender also announced a dividend of 7.5p per share, and a £50mn extension to a £75mn share buyback announced in June.
Shares of Virgin Money rose 10 per cent in early trading in London.