Virgin Money Holdings (UK) PLC Trading Statement (1866D)

TIDMVM.

RNS Number : 1866D

Virgin Money Holdings (UK) PLC

25 April 2017

VIRGIN MONEY HOLDINGS (UK) PLC: Q1 2017 TRADING UPDATE

VIRGIN MONEY MAKES CONTINUED STRONG PROGRESS IN Q1 2017

   --    Improvement in overall Net Promoter Score to +39 
   --    Recognised as the "Best Mortgage Lender" at the Mortgage Strategy awards 
   --    Highest ranked high street bank for customer satisfaction at the British Bank Awards 

Key Highlights

 
 
     *    Gross mortgage lending of GBP2.0 billion, a market 
          share of 3.4 per cent (1) 
 
 
     *    Net mortgage lending of GBP0.9 billion, a market 
          share of 12.3 per cent (2) 
 
 
     *    Credit card balances of GBP2.7 billion with stable 
          customer behaviour and arrears levels 
 
 
     *    Net interest margin in line with FY 2016 
 
 
     *    Continued strong credit performance 
 
 
     *    Full year guidance for 2017 reaffirmed 
------------------------------------------------------------ 
 

Jayne-Anne Gadhia, Chief Executive Officer said:

"I am delighted with the ongoing momentum and performance of the business so far in 2017. Our customer-focused strategy of growth, quality and returns continues to deliver excellent results and demonstrates the benefits of our low-risk business model, strong balance sheet and ongoing focus on operational excellence.

"Our mortgages and savings business continue to flourish with gross mortgage lending of GBP2.0 billion and a GBP0.9 billion increase in deposits during the quarter. Whilst maintaining our strong focus on asset quality, credit card balances grew by GBP0.2 billion to GBP2.7 billion. Our approach, including the strict and consistent application of underwriting standards, continues to support a low and stable cost of risk.

"Our focus on customer service has led to new highs in customer satisfaction with our overall Net Promoter Score improving to +39, making us one of the best-rated retail banks in the UK. We remain committed to delivering growth, quality and returns and to ensuring our strategy delivers long-term success for the benefit of all of our stakeholders."

Business review

 
 (GBP million)        As at 31 March   As at 31 December   Growth 
                                2017                2016 
-------------------  ---------------  ------------------  ------- 
 Mortgage balances            30,676              29,741      +3% 
-------------------  ---------------  ------------------  ------- 
 Credit cards 
  balances                     2,651               2,447      +8% 
-------------------  ---------------  ------------------  ------- 
 Deposit balances             28,977              28,106      +3% 
-------------------  ---------------  ------------------  ------- 
 

1 Estimate based on Bank of England data to the end of February 2017 plus the Council of Mortgage Lenders gross lending estimate for March 2017

2 Based on Bank of England data to the end of February 2017

 
 
              Mortgages 
 
               *    Gross lending of GBP2.0 billion represented a market 
                    share of 3.4 per cent(1) 
 
 
               *    Net lending of GBP0.9 billion represented a market 
                    share of 12.3 per cent(2) 
 
 
               *    Pipeline at the end of Q1 2017 of GBP2.3 billion, 14 
                    per cent higher than at the end of Q4 last year 
 
 
               *    Mortgage asset quality remained strong with credit 
                    metrics consistent with FY 2016 
 
 
               *    Mortgage lending delivered at spreads in line with 
                    expectations. 
------------------------------------------------------------------------ 
 
 
           Credit cards 
 
            *    Credit card balances of GBP2.7 billion with stable 
                 customer behaviour and arrears levels 
 
 
            *    Credit card asset quality remained strong with 
                 arrears improving modestly from FY 2016 
 
 
            *    Customer usage and transaction behaviours unchanged 
                 and in line with our modelled expectation 
 
 
            *    We support the proposals in the recent FCA 
                 consultation paper CP17/10 and do not expect there 
                 will be any material financial impact when the draft 
                 remedies are implemented if they remain as currently 
                 proposed. 
------------------------------------------------------------------------ 
 
 
     Funding 
 
      *    Deposits increased by GBP0.9 billion during the 
           quarter to GBP29.0 billion 
 
 
      *    Cash ISA inflows were 39 per cent higher than Q1 2016 
 
 
      *    Reprice of approximately GBP5 billion of balances 
           concluded with retention of over 97 per cent 
 
 
      *    TFS drawings stood at GBP2.5 billion at 31 March 
           2017. 
------------------------------------------------------------------------ 
 
 
 
              Profitability and capital ratios 
 
               *    Costs in line with expectations and the cost:income 
                    ratio improved further 
 
 
               *    Cost of risk consistent with FY 2016 and well within 
                    full year guidance 
 
 
               *    Profitability, earnings and underlying return on 
                    tangible equity in line with expectations 
 
 
               *    Capital ratios remained strong and well above 
                    regulatory requirements. 
------------------------------------------------------------------------ 
 
 
     Digital Bank 
 
      *    The development of a new digital banking platform in 
           partnership with 10x Future Technologies is 
           progressing according to plan and expectations. The 
           proposition is being designed to deliver a 
           market-leading customer experience driven by 
           best-in-class next generation analytics. The Group 
           looks forward to updating the market with an update 
           presentation later in the year. 
------------------------------------------------------------------------ 
 
 
 
              2017 Outlook 
 
               *    The UK economy has remained stronger than expected 
                    following the referendum result. A reduction in 
                    unemployment and the continued, if slower, growth in 
                    house prices since June 2016 have been positive for 
                    Virgin Money. We watch the increase in consumer 
                    indebtedness closely and continue to lend responsibly 
                    to our prime books of mortgage and credit card 
                    customers who are showing no signs of strain in the 
                    current environment 
 
 
               *    Mortgage competition remains strong in certain 
                    segments and our nimble approach to distribution and 
                    pricing enables us to manage product price and volume 
                    in accordance with expectations 
 
 
               *    Cards competition has increased and we have not 
                    followed competitors into top of the table pricing. 
                    We prioritise asset quality over balance growth, 
                    despite which we remain confident of achieving GBP3 
                    billion of prime credit card balances by the end of 
                    2017 
 
 
               *    The Group remains well placed and confident of 
                    delivering against guidance for full year 2017 which 
                    is reaffirmed today. 
------------------------------------------------------------------------- 
 
 
 
              Analyst and investor call 
     An analyst and investor call will be held as 
                       follows: 
             Date: Tuesday 25 April 2017 
 
                     Time: 9.30am 
 
                Dial: [phone] 
 
   An operator will assist you in joining the call. 
--------------------------------------------------- 
 

Enquiries:

Virgin Money Press Office

Scott Mowbray / Simon Hall

0191 279 4676 or [e-mail]

FTI Consulting

John Waples / Mitch Barltrop

07717 814520 / 07807 296032

[e-mail] / [e-mail]

Virgin Money Investor Relations

Adam Key

020 7111 1311 or [e-mail]

NOTES TO EDITORS

About Virgin Money

-- Virgin Money offers savings, mortgages, credit cards, current accounts, currency services, pensions, investments and protection products to customers across the UK

-- Virgin Money's business ambition is to make "everyone better off" - this philosophy underpins our approach to business by offering good value to customers, treating employees well, making a positive contribution to society and delivering a profit to shareholders

-- More than 12,500 charities have registered with Virgin Money Giving and, by the end of Q1 2017, over GBP530 million had been raised for charity through the service since its launch in 2009, resulting in an estimated GBP16 million more raised for charity because of its not-for-profit model.

Note: all figures contained in this trading update are unaudited

Alternative performance measures

The Group uses a number of alternative performance measures, in the discussion of its business performance and financial position. Further information on these measures is set out on page 267 of the Annual Report and Accounts 2016.

Forward looking statements

This document contains certain forward looking statements with respect to the business, strategy and plans of Virgin Money Group and its current goals and expectations relating to its future financial condition and performance. Statements that are not historical facts, including statements about Virgin Money Group's or its directors' and/or management's beliefs and expectations, are forward looking statements. By their nature, forward looking statements involve risk and uncertainty because they relate to events and depend upon circumstances that will or may occur in the future. Factors that could cause actual business, strategy, plans and/or results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward looking statements made by the Group or on its behalf include, but are not limited to: general economic and business conditions in the UK and internationally; inflation, deflation, interest rates and policies of the Bank of England, the European Central Bank and other G8 central banks; fluctuations in exchange rates, stock markets and currencies; the ability to access sufficient sources of capital, liquidity and funding when required; changes to Virgin Money's credit ratings; the ability to derive cost savings; changing demographic developments, including mortality, and changing customer behaviour, including consumer spending, saving and borrowing habits; changes in customer preferences; changes to borrower or counterparty credit quality; instability in the global financial markets, including Eurozone instability, the exit by the UK from the European Union (EU) and the potential for one or more other countries to exit the Eurozone or EU, and the impact of any sovereign credit rating downgrade or other sovereign financial issues; technological changes and risks to cyber security; natural and other disasters, adverse weather and similar contingencies outside Virgin Money's control; inadequate or failed internal or external processes, people and systems; terrorist acts and other acts of war or hostility and responses to those acts; geopolitical, pandemic or other such events; changes in laws, regulations, taxation, accounting standards or practices, including as a result of the exit by the UK from the EU, regulatory capital or liquidity requirements and similar contingencies outside Virgin Money's control; the policies and actions of governmental or regulatory authorities in the UK, the EU, the US or elsewhere including the implementation and interpretation of key legislation and regulation; the ability to attract and retain senior management and other employees; the extent of any future impairment charges or write-downs caused by, but not limited to, depressed asset valuations, market disruptions and illiquid markets; market relating trends and developments; exposure to regulatory scrutiny, legal proceedings, regulatory investigations or complaints; changes in competition and pricing environments; the inability to hedge certain risks economically; the adequacy of loss reserves; the actions of competitors, including non-bank financial services and lending companies; and the success of Virgin Money in managing the risks of the foregoing.

Any forward-looking statements made in this document speak only as of the date they are made and it should not be assumed that they have been revised or updated in the light of new information of future events. Except as required by the Prudential Regulation Authority, the Financial Conduct Authority, the London Stock Exchange plc or applicable law, Virgin Money expressly disclaims any obligation or undertaking to release publicly any updates of revisions to any forward-looking statements contained in this document to reflect any change in Virgin Money's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

Virgin Money Holdings (UK) plc - Registered in England and Wales (Company No. 03087587). Registered Office: Jubilee House, Gosforth, Newcastle upon Tyne NE3 4PL.

This information is provided by RNS

The company news service from the London Stock Exchange

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April 25, 2017 02:00 ET (06:00 GMT)