Virgin Money sees profits rise ahead of looming Nationwide deal

• Virgin Money UK saw its mortgage balance and current account balance fall 

Virgin Money confirmed it had delayed restructuring plans as its mega-merger with Nationwide Building Society looms. 

For the six months to 31 March, Virgin Money UK’s pre-tax statutory profit came in at £279million, 18 per cent higher than a year ago. 

Its net interest income, the difference between what it pays out to savers and receives in interest from loans, rose to £868million, from £855million year-on-year.

The group’s net interest margin increased by three basis points to 1.94 per cent. 

But, the group warned of a higher cost-to-income ratio in the second half. The cost-to-income ratio is a key measure of efficiency where lower is better.

Virgin Money UK’s statutory operating profit before impairment losses reached £372million, down 2 per cent from the same time a year ago.  

The lender said its programme targeting £200million in gross annualised cost savings would have a more limited impact and present ‘further headwinds’. 

David Duffy, chief executive, said: ‘We have continued to make good progress post the period-end and the programme remains important to help offset headwinds from investment and inflation, including from annual wage rises, as well as maintaining resilience and service levels.’ 

Mortgage balances slipped 2 per cent in the lender’s first half to £56.6million, ‘reflecting a subdued market for completions.’ 

Current account balances fell 3 per cent over the half, ‘reflecting general market trends as customers migrated to higher yielding savings products’, the group said. 

It added that market interest rate expectations ‘have been volatile through the period.’

The group said it had realised around £150million of annualised gross cost savings during the period, which included ‘benefits from sourcing, digitisation and organisational design.’ 

In February, around 150 staff Virgin Money UK staff were laid off, with bosses at the time warning they ‘expect further reductions in [full time employees] during the year.’

Virgin Money UK is set to be acquired by Nationwide, the UK’s biggest building society, in a £2.9billion deal. 

Nationwide’s 16million members are not being given a vote on the deal. 

Shareholders including Richard Branson’s Virgin Group have already backed the proposed deal at 220p a share for a bank that comprises parts of the old Northern Rock, Yorkshire Bank and Clydesdale Bank.