Virgin Money lending delay ahead of controversial Nationwide takeover

Virgin Money has seen a decline in lending to customers as it enters its final months as an independent, listed company.

The lender is expected to be taken over by Nationwide in the final three months of the year after the regulator gave approval last month. The £2.9bn deal has proved controversial after the building society refused to give its members voting rights.

Virgin Money saw customer lending fall 0.9 per cent to around £72bn in the third quarter to 30 June, with mortgage and business lending both down 1.1 per cent.

The lender told investors the slowdown in mortgage lending was due to a “disciplined trading approach to protect overall spreads” and “higher repayments given the current interest rate environment”, while the decline in corporate lending was due to “seasonal effects”.

Total lending was offset by 1.3 per cent growth in unsecured lending to £6.8 billion, driven by strong credit card lending.

Virgin Money also saw deposits grow by 2.4 per cent over the period, taking the total to £69.8bn, reflecting strong demand for Isas at the start of the new tax year.

Chief executive David Duffy said: ‘We delivered continued growth in deposits and unsecured lending in the third quarter and remain focused on developing innovative new products for customers. We also aim to maintain the good momentum in the fourth quarter.’

Costs rose slightly during this period, with the banks’ adjusted cost-income ratio rising from 51 to 53 percent. This was due to ‘cost headwinds from inflation and the postponement of cost savings’.

Virgin Money faces a significant expense of £32m in the quarter, of which £10m relates to restructuring costs.

The company reported a third-quarter net interest margin – the difference between the interest on loans and the interest paid to borrow – of 1.89 percent, down from £1.94 percent.

Duffy said: ‘Our strategy remains on track and financial performance is in line with expectations.

‘The acquisition by Nationwide is progressing as expected, following recent CMA approval. We expect the acquisition to close in the last quarter of the calendar year.’