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

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%

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Virgin Money reported £72 million of profit before tax for the six months that concluded on 31^st 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 30^th 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.