Virgin Money say to keep growing credit card business

(Recasts top, adds CEO, analyst comments)

By Esha Vaish

April 25 (Reuters) - Britain's Virgin Money stuck by plans to grow its credit card balances to 3 billion pounds ($3.84 billion) this year, saying tighter lending criteria and an affluent customer base would help it avoid concerns about rising consumer debt.

The credit card market in Britain, where 3.3 million people are in persistent debt, has come under scrutiny as the Bank of England has warned about a surge in risky lending and the country's financial regulator had launched a review.

Virgin Money did not expect to be materially impacted by the review, Chief Executive Jayne-Anne Gadhia told Reuters on Tuesday, as the bank had tightened lending criteria for the credit card business in the last 12-18 months to reduce the proportion of the riskier categories of credit cards it issued.

The bank's credit card balances rose 8 percent to 2.65 billion pounds in the quarter ended March 31 from the end of 2016, helped by lower unemployment.

Gadhia said an affluent client base, made up of individuals with average monthly excess income of about 750 pounds after repayment of debt, gave her confidence that customers would continue to pay debts even if interest rates rose.

"With (Other OTC: WWTH - news) elevated concerns over unsecured lending, Virgin Money have delivered a reassuring message that credit had not turned yet in first quarter," Jefferies analysts wrote, sticking by their "buy" rating and target price of 430 pence.

The company also reaffirmed the rest of its 2017 targets, which include maintaining a 3.0-3.5 percent market share of gross mortgage lending.

The Newcastle-based lender said it might also revive its plans to start lending to small and medium sized businesses, if Royal Bank of Scotland (LSE: RBS.L - news) 's to set up a 750 million pound fund for small banks is approved by the European Union.

RBS has asked to establish the fund as an alternative to having to sell off around 300 retail branches in order to settle antitrust requirements following its 2008 government bailout.

Virgin Money had mothballed its plans for SME lending after the Brexit vote.

The bank has also expressed interest in Co-operative Bank , which is up for sale, but Gadhia declined to say whether it is in talks with the struggling lender.

"We always look at everything but we're never committed to anything that's going to (raise) any concerns around risk... Strategically, the product we'd like to grow in is retail current accounts," she said.

($1 = 0.7805 pounds) (Reporting by Esha Vaish and Tenzin Pema in Bengaluru; Editing by Mark Potter and David Evans)