Virgin Money UK (VMUK) H1 2024 earnings summary

Executive summary

• Statutory profit before tax rose 18% year-over-year to £279m, driven by higher income and lower impairments.

• Net interest margin (NIM) increased to 1.94% in H1 2024, supported by credit card EIR adjustments and strong customer activity.

• Lending in target segments grew: Business lending up 7%, Unsecured up 3%, while Mortgages declined 2% amid subdued market.

• Relationship deposits increased 2% to £36.3bn, maintaining 53% of total deposits; total deposits up 2% to £68.2bn.

• Shareholders approved the proposed acquisition by Nationwide, expected to complete in Q4 2024.

Financial highlights

• Net interest income (excluding notable items) up 2% YoY to £868m; non-interest income (excluding notable items) down 8% YoY to £72m.

• Statutory total operating income rose 1% YoY to £923m; operating and administrative expenses (excluding notable items) up 5% YoY to £502m.

• Adjusted cost:income ratio increased to 52.3% (H1 2023: 51.1%), reflecting inflation and the new BoE Levy.

• Impairment charge fell to £93m (CoR: 26bps), reflecting improved macroeconomic outlook and SICR model changes.

• CET1 ratio strong at 14.6%; TNAV per share up to 361.2p.

Outlook and guidance

• FY24 NIM expected in the 190-195bps range, with H2 NIM lower than H1 due to reduced card EIR adjustments and competition.

• Anticipates 5-10% growth in business and unsecured lending for FY24; mortgage balances expected to remain subdued.

• Adjusted cost:income ratio to rise in H2, reflecting inflation, investment, and deferred restructuring.

• CoR guidance maintained at 30-35bps for FY24.

• No further share buybacks or dividends planned ahead of Nationwide acquisition; statutory RoTE expected to be lower in H2.