Virgin Money swings back to profit in H1 as impairment charges decline

By: Wajeeh Khan
Wajeeh Khan
Wajeeh is an active follower of world affairs, technology, an avid reader, and loves to play table tennis in his free… read more.
on May 5, 2021
  • Virgin Money's underlying profit jumps more than 100% in fiscal H1.
  • The British firm is cautiously optimistic about its future performance.
  • CFO says consumer spending is now approaching pre-pandemic levels.

Virgin Money UK plc (LON: VMUK) said on Wednesday it swung back to a pre-tax profit in fiscal H1 as impairment charges declined sharply. The company also highlighted that it was cautiously optimistic about its future performance.

Virgin Money UK shares slid about 2% in premarket trading on Wednesday and lost another 5% on market open. The stock is currently exchanging hands at 193 pence per share versus a much lower 131 pence per share at the start of the year.

Virgin Money’s underlying profit jumps more than 100%

Are you looking for fast-news, hot-tips and market analysis? Sign-up for the Invezz newsletter, today.

Virgin Money reported £72 million of profit before tax for the six months that concluded on 31st March. In the same period last year, it had posted £7 million of loss instead. Credit exposures related to impairment losses in the first half stood at £38 million versus the year-ago figure of a significantly higher £232 million.

At £245 million, underlying profit in H1 posted an over 100% growth in H1. Virgin Money recorded £695 million of total operating income for the six-month period. In comparison, its total operating income in the first half of 2020 stood at a higher £767 million. The British firm had posted £168 million of full-year pre-tax loss for fiscal 2020.

According to Virgin Money, net interest income tanked 3.7% in the recent period. At 1.56%, the net interest margin, as per the Leeds-headquartered company, saw a six basis points decline in the first half.  

The holding company had registered its CET 1 (common equity tier 1) ratio at 13.4% on 30th September. At the end of H1, it added, its CET 1 ratio stood at 14.4% instead. Virgin Money expects its net interest margin to remain around 1.60% this year. Statutory returns on tangible equity, as per the London-listed firm, are expected in double-digit in the medium term.

CFO Clifford Abrahams’ remarks on CNBC’s “Squawk Box”

Commenting on the financial update on CNBC’s “Squawk Box”, Virgin Money’s CFO Clifford Abrahams said:

“We’re growing on the deposit side, on the current account side. More recently, we’re seeing a real pickup in consumer spending. In the last week of April, spending on our credit cards with a big credit card issuer was up 25% week on week. And we’re seeing overall consumer spending now approaching the levels just before the pandemic, representing quite a strong recovery.”

At the time of writing, Virgin Money UK is valued at £2.74 billion.

Invest in crypto, stocks, ETFs & more in minutes with our preferred broker, eToro
67% of retail CFD accounts lose money