David Duffy, Chief Executive Officer:
“We have made a positive start to the year, with strong Q1 results in line with our guidance. We’ve delivered growth in new accounts, deposits and target lending segments, at stable margins and with ongoing cost efficiencies. We are encouraged by both our customers' resilience and improving sentiment in the mortgage market as interest rates have peaked. We carry good momentum into 2024 as we continue to successfully execute our strategy."
| Summary financials | Q1 2024 | FY 2023 | Change | Q1 2023 | Change |
|---|---|---|---|---|---|
| Key growth metrics (£'m) | |||||
| Mortgages | 57,112 | 57,497 | (0.7)% | 58,402 | (2.2)% |
| Business | 9,017 | 8,738 | 3.2% | 8,449 | 6.7% |
| Unsecured | 6,703 | 6,519 | 2.8% | 6,219 | 7.8% |
| Customer lending | 72,832 | 72,754 | 0.1% | 73,071 | (0.3)% |
| Customer deposits | 67,308 | 66,609 | 1.0% | 66,153 | 1.7% |
| Key performance metrics | |||||
| Net interest margin (NIM) | 1.89% | 1.91% | (0.02)% | 1.89% | - |
| Cost:income ratio excluding notable items (CIR) | 52% | 52% | - | 53% | 1% |
| Cost of risk (CoR) | 35bps | 42bps | 7bps | 36bps | 1bp |
| Transitional Common Equity Tier 1 (CET1) ratio | 14.0% | 14.7% | (0.7)% | 15.0% | (1.0)% |
Q1 Summary: Good business momentum, in-line with FY24 guidance
Targeted growth in customer lending; deposit mix remains stable
- Mortgages 0.7% lower in Q1 at £57.1bn, reflecting disciplined approach to trading in subdued market; early signs that market activity has improved in January, increasing back to 2019 levels
- Business lending growth of 3.2%, driven by strong demand at good margins in our sector specialisms
- Unsecured lending increased 2.8% in Q1 to £6.7bn, driven by 4.1% growth in credit card lending, with growth in retail spend year-on-year and stable repayment rates
- Deposits 1.0% higher in Q1 at £67.3bn, with overall deposit mix stable relative to Q4 23
- Further growth in total active relationship customer accounts (+27k net during Q1) to 3.8m
- Successfully migrated all existing Virgin Money Investments (VMI) customers onto new digital platform; launched new pension proposition with good initial customer reaction
Stable Net Interest Margin (NIM); FY24 NIM guidance of 190-195bps unchanged
- NIM stable in Q1 at 189bps (Q4 23: 189bps), with benefits from structural hedge reinvestment rate and cards EIR outperformance offset by mortgage spread pressure and deposit competition
- Expect NIM to be resilient over remainder of year, including reduced rate expectations
Cost:income ratio (CIR) stable as execution of our savings programme absorbed ongoing inflation
- Q1 CIR of 52% (excluding notable items); continue to expect broadly stable CIR in FY24
- Closed 39 stores and reduced office property footprint by c.35% in Q1, supporting gross savings
- Good progress towards making increasing use of cost-effective geographies for outsourced activities
- Further drive towards digital customer engagement, including removal of passbooks from savings
Credit quality remains solid; provision coverage modestly higher
- Overall arrears trends remain broadly consistent with FY23; credit card arrears continue to gradually increase in line with expectations, reflecting ongoing maturation and diversification
- Provisions up to £639m (Q4 23: £617m) given change in loan mix; coverage 3bps higher to 87bps
- £64m impairment charge in Q1, equivalent to 35bps CoR; continue to expect 30-35bps for FY24
Strong capital position supports ongoing shareholder distributions and growth opportunities
- £150m share buyback announced in November 2023 was 34% complete at end of January
- CET1 ratio lower at 14.0%, reflecting ongoing profitability offset by full c.60bps impact of £150m buyback and £0.3bn higher RWAs; fully loaded CET1 ratio now 13.8%
- Continue to expect 13-13.5% CET1 in FY24, with FY24 distributions around the FY23 nominal level, including further buybacks to be announced during H2, subject to Board and regulatory approval
- Issued new £350m AT1 and £500m RMBS; reduced TFSME by £1.2bn in Q1
Read full announcement here
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