Challenger bank Virgin Money (VM.) has only been listed on the stock exchange for just over a year but it is already one of the best performing in the banking sector. The group generated a 10.9 per cent return on tangible equity last year, up 3.5 percentage points on 2014. Above-average growth in its mortgage lending business, together with a keen eye on costs, helped boost underlying pre-tax profit by more than half to £160m.
The company grew its net interest income by a quarter to £456m, driven by an impressive 29 per cent growth in gross mortgage lending to £7.5bn. Buy-to-let lending accounts for just 17 per cent of Virgin's total mortgage loans, so management says the government’s increase in stamp duty will have no material impact at group level.
Chief executive Jayne-Anne Gadhia says the company is assuming no interest rate increases during 2016 or 2017. For this reason Virgin Money is focused on growing its credit card business further as well as keeping costs in check. On both counts the company delivered in 2015. Credit card balances increased by 44 per cent to £1.6bn and management has brought forward its £3bn target from 2018 to 2017.
Analysts at Investec Securities are forecasting net tangible assets per share of 283p at the end of December 2016.
VIRGIN MONEY (VM.) | ||||
|---|---|---|---|---|
| ORD PRICE: | 364p | MARKET VALUE: | £1.62bn | |
| TOUCH: | 364-365p | 12-MONTH HIGH: | 473p | LOW: 267p |
| DIVIDEND YIELD: | 1.2% | PE RATIO: | 16 | |
| NET ASSET VALUE: | 302p | LEVERAGE RATIO: | 23.6 | |
| Year to 31 Dec | Total operating income (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 127 | 24 | na | na |
| 2012 | 262 | 160 | na | na |
| 2013 | 379 | 185 | 42.4 | na |
| 2014 | 438 | 34 | -0.4 | nil |
| 2015 | 522 | 138 | 22.9 | 4.5 |
| % change | +19 | +306 | - | - |
Ex-div: 14 Apr Payment: 25 May | ||||
