Website branding from Virgin Money (VM.) has animals wearing summer garb under the taglines 'Get ready for summer' and 'Take it easy'. But there was no need to dress up the challenger bank's half-year figures. A 37 per cent increase in underlying profits to £81.8m prompted a maiden interim dividend and sent the shares up over 13 per cent on the day - pretty "groovy", as its marketing team would have it.
The challenger bank outperformed on most of its key metrics. Net interest income, which factors in expenses, was up 27 per cent at £220m. That was driven by gross mortgage lending of £3.6bn, an increase of 44 per cent on last year's first half. In reaction to pricing pressure in the residential sector, the company tweaked its product mix to focus on the higher-yielding buy-to-let market.
The company also managed to improve its funding by raising prices on its retail deposit back book, which means paying less interest to older customers. Importantly, 95 per cent of them stayed on board anyway. Virgin Money has also sought to increase its wholesale funding, a cheaper route in current markets.
One of the few clouds was the chancellor's profit surcharge, which will slow down the pace of returns to investors.
Analysts at Investec Securities expect full-year pre-tax profits of £123m, giving EPS of 19p. That compares with £34m and an EPS loss of 4p in 2014.
| VIRGIN MONEY (VM.) | ||||
|---|---|---|---|---|
| ORD PRICE: | 425p | MARKET VALUE: | £1.88bn | |
| TOUCH: | 418-422.5p | 12-MONTH HIGH: | 472.9p | LOW: 278p |
| DIVIDEND YIELD: | 0.4% | PE RATIO: | 35 | |
| NET ASSET VALUE: | 291p | |||
| Half-year to 30 Jun | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|
| 2014 | 6.7 | -4.0 | nil |
| 2015 | 55.0 | 8.6 | 1.4 |
| % change | +721 | - | - |
Ex-div: 27 Aug Payment: 9 Oct | |||
