Virgin Money profits rise as it makes good operational progress

High street challenger bank Virgin Money Group issued its results for the half-year to 30 June on Thursday, reporting a 10% increase in underlying profit before tax to £141.6m year-on-year.

The FTSE 250 company said its statutory profit before tax rose to to £127.2m from £123.8m a year ago, while its underlying total income increased 5% to £343m.

Its return on tangible equity was 14.2%, and its banking net interest margin was 164 basis points for the period.

Virgin Money’s cost-income ratio was 49.9%, with the board reporting a continued low cost of risk at 0.16% under IFRS 9, a common equity tier 1 ratio of 16.3% and a leverage ratio of 3.8%.

The board declared an interim dividend of 2.3p per ordinary share to be paid in September.

On the operational front, Virgin Money said it maintained a “disciplined approach” to growth across its core markets, with its SME savings franchise on track to deliver £500m of new SME deposits by the end of 2018.

Its partnership with long-haul airline Virgin Atlantic was said to be “off to an excellent start”, with applications significantly ahead of expectations.

The joint venture with Aberdeen Standard Investments was announced in March, with the board saying a new investment proposition was planned for 2019.

Virgin Money also said the development of its digital banking platform was progressing “well”, adding that it maintained “strong” customer satisfaction with an overall net promoter score of +37.

It also made further improvement to its mean gender pay gap, with a 9% reduction between April 2017 and April this year, to 29.7%.

“I am delighted to report that our customer-focused strategy of growth, quality and returns continued to drive strong financial and operational performance during the first half of the year,” said chief executive Jayne-Anne Gadhia.

“We also made good progress in delivering on our strategic initiatives.”

Gadhia said the company continued to maintain a strong balance sheet, which benefited from recent changes to its capital models to ensure they fully reflected the “excellent credit” quality of its lending portfolios.

“The recommended offer made by CYBG for Virgin Money in June reflects confidence in our strategy, our track record of delivery and the complementary models of the two businesses and will accelerate the delivery of our strategic objectives.”