Virgin Money UK PLC Full Year Results 2022
David Duffy, Chief Executive Officer:
“2022 has been a milestone year for Virgin Money. We have good momentum while delivering a strong performance and improved returns for our shareholders. We’ve changed the game in purpose-led flexible working to create an engaged, high-performing organisation that’s cost-efficient and agile, which will underpin targeted growth through further digital innovation.”
“While we have solid credit quality across our lending, we are aware that some customers will have to make difficult decisions in this environment, and we are proactively offering them help and support."
Summary financials
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Strong financial performance in 2022
- NIM expanded further to 1.85% (2021: 1.62%), supported by higher rates and further mix optimisation (Q4: 1.86%)
- Underlying non-interest income up 2% YoY, reflecting higher activity levels offsetting fair value movements
- Underlying costs of £914m were broadly stable YoY, in line with guidance, while CIR reduced 5%pts to 52%
- Pre-Provision Operating Profit of £841m, up 26% on 2021, reflecting stronger income and well-controlled costs
- Minor impairment charge of £52m (7bps cost of risk) reflecting updated macroeconomics, but with lower post model adjustments
- Underlying profit 1% lower YoY given £131m impairment release in 2021
- Statutory profit increased 43% YoY, reflecting higher income and lower adjusting items; statutory RoTE of 10.3% (2021: 10.2%)
- Credit quality remains robust with low and stable arrears; provision coverage of 62bps above pre-pandemic levels
- CET1 ratio remains strong at 15.0% (2021: 14.9%); announced further £50m buyback, taking 2022 buybacks to £125m; 7.5p final dividend (2022: 10p) means total 2022 shareholder distributions of £267m, equivalent to c.57% payout
Returning to net lending growth supported by continued strong relationship deposit inflows
- Strong relationship deposits growth, increasing 13% YoY to £34.6bn; continue to optimise overall deposits, down 2.3% to £65.4bn
- Overall lending growth (0.8%) in 2022 to £72.6bn; Unsecured +13.8% to £6.2bn driven by credit cards; Business lending (2.7%) to £8.2bn as lower Government lending offset 1.7% growth in BAU; Mortgages stable at £58.2bn but returned to growth in H2
- Average interest earning assets were £86.3bn in FY22; Sep-22 spot balances were c£90bn with higher levels expected through FY23
Strong Purpose-led delivery in first year of our accelerated digital strategy
- Launched cost of living hub to support customers with money saving suggestions, budgeting tools and links to external resources
- Strong reception for new digital products with 7% YoY growth in current account sales; record new credit card origination of c.630k +49% YoY); c.650k cashback users; launched new Business M-Track and Marketplace; c.40k waitlist for Slyce
- A Life More Virgin supporting higher colleague engagement (+11%pt YoY); launched Agile change framework, increasing the speed of change at c.25% lower costs; property and branch footprint reduced c.50% YoY
- Delivered c.£69m of annualised gross savings this year; further progress on digitisation with 43% of key customer journeys automated (2021: 27%); mobilising cloud migration and removing legacy applications
- Delivering further propositions in 2023 including refreshed Wealth proposition, mortgage end-to-end digitisation and fully refreshed new digital home and travel insurance
- Anticipating the initial launch of our digital wallet early in 2023 with additional functionality to be added through the year
Outlook upgraded
- Expect NIM to be 185-190bps in FY23 based on current rate expectations; in the medium term, expect mix-driven NIM expansion and OOI to grow from digital proposition enhancements
- Cost:income ratio expected to improve further to c.50% in FY23; continue to target less than 50% in FY24
- Cost of risk anticipated to normalise around through the cycle level of 30-35bps in FY23
- Targeting growth in Unsecured & BAU Business, moderating in 2023; maintain mortgage market share in the medium term
- Will maintain CET1 above 14% in FY23 during period of macroeconomic uncertainty; expect to return to target 13-13.5% CET1 range by the end of FY24, after growth, distributions and RWA headwinds, including hybrid model implementation
- In line with the Group’s updated capital framework, shareholder distributions to reflect 30% full year dividend pay-out, supplemented by buybacks, subject to ongoing assessment of surplus capital, market conditions and regulatory approval
- Expect c.11% statutory RoTE in FY24, consistent with previous target of greater than 10%
Read the full announcement here.
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