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David Duffy, Chief Executive Officer:

“Over the first six months, we have continued to deliver on our strategic ambitions in line with expectations. While we expect there to be headwinds through the second half of the year, we remain well placed to deliver growth in our target segments.”

Summary financials


6 months to 31 Mar 2024
£m
6 months to 31 Mar 2023
£m
Change
%
6 months to 30 Sep 2023
£m
Change
%
Net interest income (excluding notable items)
868
855
2
861
1
Non-interest income (OOI) (excluding notable items)
72
78
(8)
79
(9)
Total operating income (excluding notable items)
940
933
1
940
-
Notable items in income(1)
(17)
(19)
(11)
(27)
(37)
Statutory total operating income
923
914
1
913
1
Operating and administrative expenses (excluding notable items)
(502)
(477)
5
(494)
2
Notable items in expenses(1)
(49)
(57)
(14)
(145)
(66)
Statutory operating and administrative expenses
(551)
(534)
3
(639)
(14)
Statutory operating profit before impairment losses
372
380
(2)
274
36
Impairment losses on credit exposures
(93)
(144)
(35)
(165)
(44)
Statutory profit on ordinary activities before tax
279
236
18
109
156

Performance metrics(2)

Total customer lending
£72,675m
£72,435m
0.3%
£72,754m
(0.1)%
Net interest margin (NIM)
1.94%
1.91%
3bps
1.91%
3bps
Return on tangible equity (RoTE)
9.1%
6.1%
3.0%pts
1.6%
7.5%pts
Cost: income ratio
59.7%
58.5%
1.2%pts
70.0%
(10.3)%pts
Adjusted cost: income ratio(3)
52.3%
51.1%
1.2%pts
52.6%
(0.3)%pts
Cost of risk (CoR)
0.26%
0.40%
(14)bps
0.42%
(16)bps
Common Equity Tier 1 (CET1) ratio (IFRS 9 transitional)
14.6%
14.7%
(0.1)%pts
14.7%
(0.1)%pts

(1) Full details of notable items are included on page 88.

(2) For definitions of the performance metrics, refer to ‘Measuring the Group’s performance’ on pages 372 to 380 of the Group's 2023 Annual Report and Accounts.

(3) Adjusted to exclude all notable items and the new BoE Levy recognised in 2024 of £10m. Refer to page 89 for further details.

Delivered strong financial performance in H1 2024

  • NIM expanded further to 1.94% in H1 (Q224: 1.99%), supported by EIR adjustments in the credit card portfolio, reflecting strong customer activity and updated assumptions
  • OOI (excluding notable items) down 8% YoY, reflecting reclassification of insurance costs incurred on packaged current accounts
  • Operating expenses (excluding notable items) 5% higher YoY, driven by inflation and the new BoE Levy (£10m in Q2) partially offset by ongoing delivery of the cost savings programme; adjusted C:I ratio modestly higher YoY at 52.3%
  • Notable expenditure included £33m from restructuring activities and £15m related to new financial crime prevention programme
  • Impairment charge of £93m (CoR: 26bps), incorporating benefit from the ongoing SICR review of the Group’s credit card portfolio and a modestly improving macroeconomic outlook; credit quality remains solid; stable provision coverage of 84bps (FY23: 84bps)
  • Statutory profit before tax increased 18% YoY to £279m (9.1% statutory RoTE), primarily reflecting the lower impairment charge
  • CET1 ratio remains strong at 14.6% (FY23: 14.7%); movement includes 2p foreseeable FY 2024 dividend and c.£63m returned to shareholders as part of the £150m buyback programme announced alongside FY23, prior to the cancellation of the programme

Further growth in target lending segments and relationship deposits, in line with strategy

  • 2% growth in active relationship customer accounts during H1 to 3.8m accounts
  • Relationship deposits 2% higher in H1 at £36.3bn, remaining 53% of total deposits; total deposits increased 2% to £68.2bn
  • Continued growth in target segments; Unsecured +3%, driven by growth in cards; Business lending +7% as growth in BAU balances offset a reduction in Government scheme lending; Mortgages reduced 2% given subdued market; overall lending stable

Continued strategic execution

  • Completed purchase of abrdn’s c.50% stake in Virgin Money Investments(4) in April for £20m, following successful roll-out of new investment and pension services
  • Fully rolled-out premium broker service to 225 mortgage intermediaries, covering c.40% of VMUK applications, contributing to a stronger pipeline of recommended cases from those brokers
  • New virtual assistant Redi has now supported over 1 million conversations, attracting strong Smile scores and solving more than 50% of queries without the need for further escalation
  • Reduced office property footprint by c.35% in H1, supporting gross savings
  • Progressing second phase of Consumer Duty review ahead of July implementation

FY24 revised outlook

  • Anticipate 5-10% growth across target lending segments of business and unsecured lending in FY24, as guided at FY23
  • Continue to expect NIM to be in 190-195bps range for FY24, with NIM lower in H2 vs. H1, reflecting lower expected contribution from cards EIR adjustments, ongoing competition and lower interest rates, partially mitigated by the reinvestment rate of the structural hedge
  • In light of the proposed acquisition by Nationwide Building Society (‘Nationwide’), the Group has deferred certain restructuring activities
  • Adjusted cost: income ratio anticipated to be higher in H2 vs. H1, reflecting the latest outlook for income, inflation, ongoing investment and cost savings
  • Continue to expect CoR of 30-35bps for FY24, incorporating SICR review on card portfolio & modestly improving economic outlook
  • Given the proposed acquisition by Nationwide, the Group does not intend to announce any further share buybacks or dividends
  • As a result of these factors, statutory RoTE expected to be lower in H2 vs H1

(4) Legal entity name ‘Virgin Money Unit Trust Managers Limited’

Read the full announcement here

FORWARD-LOOKING STATEMENTS

This document and any other written or oral material discussed or distributed in connection with the results (the ‘Information’) may include forward-looking statements, which are based on assumptions, expectations, valuations, targets, estimates, forecasts and projections about future events. These can be identified by the use of words such as 'expects', 'aims', 'targets', 'seeks', 'anticipates', 'plans', 'intends', 'prospects', 'outlooks', 'projects', ‘forecasts’, 'believes', 'estimates', 'potential', 'possible', and similar words or phrases. These forward-looking statements are subject to risks, uncertainties and assumptions about the Group and its securities, investments and the environment in which it operates, including, among other things, the development of its business and strategy, any acquisitions, combinations, disposals or other corporate activity undertaken by the Group, trends in its operating industry, changes to customer behaviours and covenant, macroeconomic and/or geopolitical factors, the repercussions of the outbreak of coronaviruses (including but not limited to the COVID-19 pandemic), changes to its Board and/or employee composition, exposures to terrorist activity, IT system failures, cyber-crime, fraud and pension scheme liabilities, risks relating to environmental matters such as climate change including the Group’s ability along with the government and other stakeholders to measure, manage and mitigate the impacts of climate change effectively, changes to law and/or the policies and practices of the Bank of England (BoE), the Financial Conduct Authority (FCA) and/or other regulatory and governmental bodies, inflation, deflation, interest rates, exchange rates, tax and national insurance rates, changes in the liquidity, capital, funding and/or asset position and/or credit ratings of the Group, future capital expenditures and acquisitions, the repercussions of the UK’s exit from the European Union (EU) (including any change to the UK’s currency and the terms of any trade agreements (or lack thereof) between the UK and the EU), Eurozone instability, the repercussions of Russia’s invasion of Ukraine, the conflict in the Middle East, any referendum on Scottish independence and any UK or global cost of living crisis or recession.

In light of these risks, uncertainties and assumptions, the events in the forward-looking statements may not occur. Forward-looking statements involve inherent risks and uncertainties and should be viewed as hypothetical. Other events not taken into account may occur and may significantly affect the analysis of the forward-looking statements. No member of the Group or their respective directors, officers, employees, agents, advisers or affiliates (each a ‘VMUK Party’) gives any representation, warranty or assurance that any such projections or estimates will be realised, or that actual returns or other results will not be materially lower than those set out in the Information. No representation or warranty is made that any forward-looking statement will come to pass. Whilst every effort has been made to ensure the accuracy of the Information, no VMUK Party takes any responsibility for the Information or to update or revise it. They will not be liable for any loss or damages incurred through the reliance on or use of it. The Information is subject to change. No representation or warranty, express or implied, as to the truth, fullness, fairness, merchantability, accuracy, sufficiency or completeness of the Information is given.

Certain industry, market and competitive position data contained in the Information comes from official or third party sources. There is no guarantee of the accuracy or completeness of such data. While the Group reasonably believes that each of these publications, studies and surveys has been prepared by a reputable source, no member of the Group or their respective directors, officers, employees, agents, advisers or affiliates have independently verified the data. In addition, certain industry, market and competitive position data contained in the Information comes from the Group’s own internal research and estimates based on the knowledge and experience of the Group’s management in the markets in which the Group operates. While the Group reasonably believes that such research and estimates are reasonable and reliable, they, and their underlying methodology and assumptions, have not been verified by any independent source for accuracy or completeness, and are subject to change. Accordingly, undue reliance should not be placed on any of the industry, market or competitive position data contained in the Information.

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