Virgin Money UK PLC (LSE:VMUK) booked only modest net interest income (NII) growth in the year ending September 2023 in what has generally been a period of massive profits for the UK banking sector.
The challenger banking corporation, which includes the Clydesdale and Yorkshire Bank chains, increased NII by 8% year on year to £1.7 billion.
However, statutory profit before tax declined significantly due to bad credit exposure to £345 million, more than 40% lower compared to 2022.
Total customer lending stayed flat, while the net interest margin (NIM) increased from 1.85% to 1.91%.
As a challenger bank, Virgin Money has had to offer better margin spreads than the big banks - Barclays, for instance, expects NIMs to stay above 3% in the near term.
Virgin Money’s ongoing store closures also caused near-term restructuring charges that hit the bottom line.
"We made good progress executing our strategy in 2023, growing both our relationship customer base and target lending segments,” said chief executive David Duffy.
Duffy said he was “confident in the outlook for our business” and expects to deliver around £800 million in distributions to its investors between 2024 and 2027.
As predicted, Virgin Money announced a £150 million share buyback programme in conjunction with today’s results. The buyback kicks off today and will extend until May next year.
A separate dividend declaration of 2p per ordinary share was also announced.
Virgin Miney anticipates continued loan expansion in its Unsecured and Business as Usual (BAU) segments, while maintaining its share in the mortgage market.
This, combined with volume growth and margin improvement, is expected to drive income growth in the medium term.