Mortgage balances stable at £57.5 billion
Virgin Money UK has delivered a strong financial performance in the third quarter of its financial year, reporting growth in net lending and deposits, robust margin, and broadly stable credit quality.
According to the lender, mortgage balances of £57.5 billion were broadly stable in the quarter, against a subdued market backdrop. The group, however, expects housing activity to remain muted in the near term, given the implications of higher rates.
Net interest margin (NIM) remained stable in Q3, reducing one basis point to 1.93% compared with the second quarter. The group continues to expect stable NIM across the second half compared to the first half.
Virgin Money also said that non-interest income was modestly lower in Q3 compared to Q2 as it made changes to packaged account benefits and reduced associated fees, aligned with Consumer Duty regulations.
“We have delivered another quarter of good progress against our strategy, with growth in both deposits and our target lending segments,” David Duffy (pictured), chief executive at Virgin Money, stated in the company’s Q3 2023 trading update. “Given our strong capital position, we anticipate a total of around £175 million of buybacks for FY23, with more to follow as we normalise our surplus capital position by the end of next year.
“Our overall credit quality remains stable, and we are fully committed to doing the right thing by our customers, through competitive rates, innovative products and proactive communication, as well as supporting government initiatives to help people through the current challenging environment.”
According to John Choong, equity research analyst at Investing Reviews, Virgin Money’s results showed continued signs of encouragement that the lender was doing well amid the macroeconomic environment, as evidenced by its £175 million share buyback programme.
“Mortgage lending remains stable while deposits continue to grow,” he said. “The rise in credit card arrears is the fly in the ointment, but something all lenders are having to deal with in the current climate.”
Stephen Perkins, managing director at Yellow Brick Mortgages, commented that, so far, mortgages had been stable for Virgin Money due to the full impact of rate rises not being realised with much of their loan book yet.
“The Mortgage Charter allows for some respite and support in the short term,” he added. “However, a spike in mortgage arrears will surely follow in the months ahead.”
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