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Virgin Money reported a 41 per cent rise in pre-tax rise profits last year, as the lender said it had increased its customer base by 15 per cent and hiked its dividend.

The bank, which is challenging larger high street rivals for market share, said statutory profit before tax rose to £194.4m in 2016 – up from £138m the previous year. Underlying profit before tax was up 33 per cent to £213.3m – higher than the £202.9m analysts had expected.

Basic earnings per share rose 28 per cent to 29.4p on a statutory basis over the period, while Virgin Money also said the total dividend for 2016 would be 5.1p per ordinary share – up 13 per cent from the previous year.

The bank announced its customer base had grown to 3.3m over the course of the year as it continues to make inroads into rivals’ market share.

Virgin Money is competing with other smaller lenders including Metro Bank and Shawbrook for customers dissatisfied with the big five British high street banks — Barclays, Lloyds Banking Group, Royal Bank of Scotland, HSBC and Santander.

The lender’s capital position weakened from the previous year, with a 2.3 per cent drop in its common equity tier 1 ratio to 15.2 per cent.

Virgin also said that as a result of the strength of the business, it remained well-placed to maintain a “solid double-digit return” on tangible equity, predicting that 2017′s return would surpass the 12.4 per cent return on tangible equity in 2016 – a 1.5 per cent rise on the previous year.

Jayne-Anne Gadhia, chief executive, said:

I am delighted to report another very successful year for Virgin Money in 2016. Our customer-focused strategy of growth, quality and returns continues to achieve and maintain outstanding customer approval ratings, excellent asset quality and strong financial performance.

On Brexit, the lender noted:

As a UK retail bank focused on serving domestic customers, the decision to exit the EU does not directly impact on our business.

Whilst the UK economy proved resilient during the second half of the year, the eventual timing and nature of the UK’s exit from the EU remains unclear and the longer-term impact on the economy is uncertain.

Copyright The Financial Times Limited 2017. All rights reserved.
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