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Virgin Money UK PLC on Thursday reported modest topline growth in its recent financial year, but a sharp fall in profit, prompting the lender to take a hatchet to its dividend. The Newcastle, England-based bank said net interest income rose to £1.69 billion in the year that ended September 30 from £1.58 billion the year before, while non-interest income was unchanged at £140 million. Net interest margin improved to 1.91% from 1.85%. However, pretax profit dropped to £345 million from £595 million, mostly due to higher credit impairment losses, which Virgin Money hiked to £309 million from £52 million. The bank said this reflects ‘prudent macroeconomics and provision build from higher modelled’ expected credit loss. ‘Credit quality remains robust with low arrears,’ Virgin Money said. The company declared a final dividend of 2 pence, down from 7.5p a year before, bringing the annual total to 5.3p, little more than half of the 10p payout in financial 2022. More positively, Virgin Money announced a further £150 million share buyback programme, which brings total shareholder distributions for the year to £272 million, up around 2% from the prior year. The new buyback, to be run by Goldman Sachs International, will start on Thursday and end by May 16 next year. It recently completed the £50 million buyback that it had announced in August. ‘With the momentum we carry into 2024, we are confident in the outlook for our business and we expect to deliver around £800 million in distributions to our investors by the end of the three-year period ending in 2024,’ Virgin Money said. The bank said its CET1 ratio remained strong at 14.7%, edging down from 15.0% a year before. Looking ahead, Virgin Money expects a net interest margin of 190-195 basis points in financial 2024, versus 191 points in financial 2023, and expects to deliver an underlying return on tangible equity of around 10% or a statutory RoTE of around 8%. Statutory RoTE was 3.9% in the recent year, down from 10.3% in financial 2022. Virgin Money shares were down 2.5% at 153.10p on Thursday morning in London. Copyright 2023 Alliance News Ltd. All Rights Reserved.
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