Virgin Money shares surge as rising interest rates provide healthy growth in profits

Virgin Money UK Stocks rose the most of any FTSE 350 company on Monday morning after the lender reported excellent full-year results following successive base rate hikes.

The financial services company saw its shares grow 11.8 per cent to 162.75 pence when it revealed that statutory profit grew 13 per cent year-on-year to £537 million in the year ended September.

Earnings growth was boosted by a £180 million increase in net interest income, around half of which was related to liquid assets, with trading further supported by a large number of unsecured and mortgage loans.

The Bank of England raised UK interest rates six times in succession during the period to counter rising inflation, mainly caused by higher energy and food costs.

This has led to a windfall for UK banks, although they have also benefited from the continued high demand for mortgages as house prices continued to reach even greater heights.

Total lending at Virgin Money rose 0.8 per cent to £72.6 billion, supported by record credit card sales and a rebound in consumer spending after last year’s tight lockdown restrictions forced non-essential stores to temporarily close.

Profitability was also boosted by lower adjustment costs, such as restructuring costs related to the group’s digital investments and payment protection insurance refunds.

The lower costs helped offset a £52m write-down the company took to cover possible defaults as it warned of a more uncertain economic outlook.

Group CEO David Duffy said: “Following a positive recovery in post-Covid expectations, recent events have caused forecasts to deteriorate.

“As we enter a more volatile environment, with higher inflation and rates, we are closely monitoring any impact.”

Still, the former Clydesdale Bank boss said the company had “a prudently secured loan portfolio, robust coverage and a defensive asset mix” and was “ready and able to continue to support customers, colleagues and communities.” [it] served.’

The robust performance enabled Virgin Money to announce £267m in dividends and share buybacks for investors after returning just £14m to investors in FY 2021.

In addition, the Newcastle-based company said today that most of its 7,500 employees would receive a 10 percent supplement to their wages to help them cope with the worsening inflationary environment.

The first installment will be paid in January, the second will follow in July and will be in addition to a payment of £1,000 towards living expenses paid in August.

Russ Mould, director of investment at AJ Bell, said: ‘The better-than-expected dividend and buyback of Virgin Money are good news in their own right, but are also crucial to what they say about management’s confidence in the company’s prospects. ‘