Virgin Money profits up but still sees tough second half

13th Jun 2024 07:03

(Sharecast News) - Virgin Money, set to be taken over by Nationwide in a £2.9bn deal, on Thursday posted an 18% jump in interim profit as it continued to benefit from higher interest rates and a lower bad debt charge, but reiterated it expected headwinds in the second half of the year.

Pre-tax profit for the six months to March 31 came in at £279m from £236m a year earlier. Net interest income rose 2% to £868m, while net interest margin - the difference between the bank's lending and savings rates - was up three basis points to 1.94%.

Bad debt charges were down to £93m from £144m. Lending was flat at £72.6bn, of which mortgage were down 2% to £56.6m amid increased market competition.

"So far this financial year, the macroeconomic backdrop has modestly improved, with inflation continuing to fall, though remaining above the Bank of England's target range."

"As a result, market interest rate expectations have been volatile through the period, but with continued low unemployment and wage inflation supporting customer affordability," said Virgin chief executive David Duffy.

The competition watchdog is to investigate the controversial acquisition by building society Nationwide. The unusual takeover of a listed bank by a member-owned building society, first announced in March, would create the UK's second-largest savings and mortgage provider.

Virgin Money shareholders including Richard Branson's Virgin Group have already backed the takeover deal at 220p a share for a bank that comprises parts of the old Northern Rock, Yorkshire Bank and Clydesdale Bank.

However, Nationwide members have been denied the same rights and some have started a campaign to have a say.

In a submission to the Competition and Markets Authority, the 'GIve Nationwide Members a Say' campaign said the merger "could result in a reduction in customer service quality".

"Currently, Nationwide holds a market leadership position based on independent surveys of customer satisfaction levels. However, large-scale mergers often lead to operational challenges and cost-cutting measures, which could degrade the overall customer experience. This deterioration would be particularly concerning for customers who rely on personal banking services."

Reporting by Frank Prenesti for Sharecast.com