Virgin Money says profit margins boosted by higher interest rates

Virgin Money said there are no signs of financial stress among customers as higher interest rates drove up profit margins for the lender.

The bank added that it saw a rise in customers opening new accounts, with particular growth in demand for credit cards.

It reported a 45% rise in personal and business accounts compared with last year, and said 160,000 new credit cards were opened in the three months to the end of June.

Our third quarter 2022 trading update is live! Read our full announcement here:https://t.co/PLglKQTkAj #VMUKresults pic.twitter.com/VfUD3abqDI

— Virgin Money UK PLC (@VirginMoneyNews) August 2, 2022

The business said its margins were boosted by higher interest rates, with the firm therefore raising its net interest margin forecast for the full financial year.

However, ongoing competition in the mortgage market offset returns somewhat as buyers shopped around for the best deal.

Unsecured lending grew 3.8% in the latest quarter to reach £6 billion, which the lender said was driven by high-quality credit card balances from new card sales and higher retail spending.

Meanwhile, business lending rose slightly by 0.3% to total £8.3 billion, despite a drop in Government support for business lending and a more subdued market.

Virgin Money’s chief executive, David Duffy, said there are limited signs of credit concerns among customers but that the business is ready to support people as higher living costs could lead to affordability issues.

“Virgin Money has had another positive quarter, financially and strategically,” he said.

“Looking out into an uncertain economic environment, while our asset quality remains resilient and customers aren’t yet showing signs of financial stress, we are helping our customers and colleagues navigate what will be a more difficult period for many.”

Several banks have said business has benefited from higher interest on customer loans so far this year.

Metro Bank reported record revenue growth in July, while Lloyds Banking Group raised its full-year profitability outlook as it said higher interest rates are providing a boost to its earnings.

The Bank of England has increased the base rate from 0.1% to 1.25% since last December to try to limit soaring inflation, and it is expected to raise it for the sixth time in a row on Thursday.