Virgin Money UK released £19m of credit provisions in the third quarter and upgraded its margin guidance for the year as the bank traded in line with expectations.
The FTSE 250 lender said the release was prompted by the improving economic outlook and that if that trend continued it could release further provisions with its annual results.
The bank’s net interest margin improved to 168 basis points in the third quarter from 160 basis points in the second quarter. It forecast the net interest margin “modestly ahead” of 160 basis points for the full year.
Relationship deposits increased 3.7% to £29.8bn and total deposits fell 0.8% to £68bn. Mortgages increased 0.7% to £58.7bn, helped by activity around stamp duty holiday deadlines. Higher credit card lending drove a 2.5% increase in personal lending to £5.2bn as economic activity picked up.
The bank’s common equity tier 1 capital ration increased by about 40 basis points to 14.8%. It said the annual ratio would be broadly stable against the third-quarter level and that risk-weighted asset inflation was more likely in 2022.
David Duffy, the bank’s chief executive, said: “Virgin Money performed well as our strategy continued to translate into improved financial delivery in a strengthening environment. We carried our momentum of relationship deposit growth into the second half, reducing our cost of funds.
“Our asset quality remained robust, while capital ratios improved further. We have increased full-year NIM guidance and, while Covid continues to impact the near-term, we have a strong capital position and robust provisions.”
