Profit surged at challenger bank Virgin Money in the first half of its financial year, after it set aside less cash to cover soured loans during the Covid-19 crisis.
The British bank reported pre-tax profit of £72m for the six months to the end of March in its 5 May results, jumping from a £7m loss a year earlier as it took on hefty credit impairments for the pandemic ahead.
Virgin Money said it had set aside just £38m in the most recent half-year period for possible bad loans, falling 84% compared to £232m in the period before.
The bank, which was formed out of a merger between Virgin Money and CYBG, is “cautiously optimistic” about its outlook thanks to the UK’s vaccination rollout and its subsequent economic impact, its chief executive David Duffy said.
The bank’s net interest margin dropped to 1.56% from 1.62%, as the low interest rate environment continued to create a challenging landscape for lenders that rely on such metrics for income.
However, Virgin Money said it expects the margin to reach around 1.60% for the full financial year, having hit the same target in its second quarter. Costs are expected to be less than £890m.
Duffy said the quality of its loan book “remained resilient”, as most customers on payment holidays returned to making repayments.
“We’re continuing to manage through what is still an uncertain economic backdrop, but the bank is well placed, with a strong balance sheet, and through ongoing strategic delivery we have a clear path to long-term, improved sustainable returns,” he added.
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