Virgin Money UK PLC (LSE:VMUK) reported a strong increase in profits in the year to 30 September 2022 and a further £50mln share buy-back, as higher interest rates gave a boost to margins.
The British lender posted a 43% increase in pre-tax profits to £595mln from £417mln last year while the net interest margin expanded to 1.85% from 1.62%.
The group took an impairment charge of £52mln but said credit quality remains robust with low and stable arrears and with provision coverage 62 basis points (bps) above pre-pandemic levels.
CET1 ratio remained strong at 15.0% while the company also announced a further £50mln share buy-back and a final dividend of 7.5p, down from last year’s 10p.
Looking ahead, net interest margins are expected to be 185-190bps in full-year 2023, while the cost:income ratio is forecast to improve further to c.50% with a target of less than 50% in full-year 2024.
The group said it plans to maintain CET1 above 14% in full-year 2023 during a period of macroeconomic uncertainty and return to a target range of 13%-13.5% by the end of full-year 2024.
Shareholder distributions will reflect a 30% full-year dividend pay-out, supplemented by buybacks, subject to ongoing assessment of surplus capital, market conditions and regulatory approval, Virgin Money stated.
David Dufy, chief executive officer, said: "The macroeconomic outlook has become more uncertain over the course of the year.
“Following a positive recovery in expectations post-COVID, recent events have seen forecasts deteriorate. As we enter a more volatile environment, with higher inflation and rates, we are carefully monitoring for any impacts.”