Virgin Money shares jump on higher earnings and investor payouts

LONDON, Nov 21 (Reuters) – Shares in British lender Virgin Money (VMUK.L) jumped 16% on Monday after reporting a full-year rise in profits and investor payouts amid rising bank rates. Bank of England has raised its finances despite an imminent threat. economic downturn.

Virgin Money reported pre-tax profit of 595 million pounds ($703 million) for the year ending September, up 43% from 417 million a year earlier.

The bank – which has resumed payments to investors over the past year – said it would pay a final dividend of 7.5p per share and buy back a further £50m of shares.

JPMorgan banking analysts said the lender’s results were strong, adding that shareholder returns were more generous than expected.

Virgin Money shares were last up 15% at 0827 GMT.

The country’s sixth-largest lender was created by the merger of Virgin Money and rival CYBG in 2018, in a bid to challenge the market dominance of banks including Lloyds and Barclays.

Investors fear an economic crisis in Britain could lead to an increase in loan defaults and bank finances, with official budget forecasters predicting that households will face record living standards over the next two years.

However, lenders have also benefited from higher rates intended to curb runaway inflation, as they profit from the gap between what they charge on loans and what they pay on deposits.

Virgin Money said it expected its net interest margin – a key measure of profitability – to decline from 185 basis points to between 185 and 190 basis points next year.

The bank has set aside £52m to cover possible bad loans to reflect the deteriorating economic outlook, but said there were limited signs of credit problems so far.

CEO David Duffy told reporters there were nonetheless signs customers were being stretched.

Customer spending on energy bills rose 57% and grocery spending rose 16%, Duffy said, while the lender saw a slight increase in credit card spending for essentials. .

“We recognize that some customers will have to make difficult decisions in this environment, and we are proactively offering them help and support,” Duffy said.

Virgin Money had raised staff salaries to help them cope with cost-of-living pressures, Duffy said.

The bank has agreed to a 9-11% pay rise for its staff, split between the January and July raises, a bank spokesman said.

($1 = 0.8467 pounds)

Reporting by Iain Withers; edited by Emma-Victoria Farr and Jason Neely

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