A rapidly growing mortgage book meant Virgin Money (VM.) was unable to escape the effects of low interest rates. New business priced below its back book continued to put pressure on its net interest margin (NIM), which declined by 5 basis points to 1.6 per cent during the first half of the year. With the prospect of another base rate cut by the Bank of England, management does not expect an increase in this figure during the second half.
Net interest income from mortgages and savings business increased 8 per cent to £190m, yet NIM here declined to 1.43 per cent from 1.55 per cent at the same time the previous year. However, chief executive Jayne-Anne Gadhia says the business's high customer retention rate, plus the fact around 95 per cent of them are on a fixed-term rate, means she is not too concerned about the impact on the challenger's growth prospects.
Credit cards business continued to grow rapidly, with NIM growth of 42 per cent to £62m. Balances are now £2.1bn and Ms Gadhia is confident the business will achieve its target of £3bn by the end of 2017.
Analysts at Numis expect net tangible assets per share of 273p at the end of December 2016, compared with 251p a year earlier.
VIRGIN MONEY (VM.) | ||||
|---|---|---|---|---|
| ORD PRICE: | 263p | MARKET VALUE: | £1.17bn | |
| TOUCH: | 261.3-262.4p | 12-MONTH HIGH: | 460p | LOW: 196p |
| DIVIDEND YIELD: | 1.8% | PE RATIO: | 9 | |
| NET ASSET VALUE: | 307p | LEVERAGE: | 25.5 | |
| Half-year to 30 June | Total operating income (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2015 | 255 | 55.0 | 8.6 | 1.4 |
| 2016 | 288 | 93.7 | 14.1 | 1.6 |
| % change | +13 | +70 | +64 | +14 |
Ex-div: 11 Aug Payment: 23 Sep | ||||
