David Duffy, Chief Executive Officer:
“We have delivered another quarter of good progress against our strategy, with growth in both deposits and our target lending segments. Given our strong capital position, we anticipate a total of c.£175m of buybacks for FY23 with more to follow as we normalise our surplus capital position by the end of next year.
Our overall credit quality remains stable and we are fully committed to doing the right thing by our customers, through competitive rates, innovative products and proactive communication, as well as supporting government initiatives to help people through the current challenging environment.”
|Key growth metrics (£'m)
|Key performance metrics
|Net interest margin (NIM)
|Underlying cost:income ratio
|Cost of risk (CoR)
|Transitional Common Equity Tier 1 (CET1) ratio
Q3 Summary: Solid financial performance, FY23 guidance maintained; resumed share buyback
Growing in target lending segments; continued deposits inflows
- Further growth in total active relationship customer accounts (+51k during Q3) to 3.7m
- Mortgages broadly stable in Q3 at £57.5bn, in a subdued market
- Business lending was up 1.6% in Q3 to £8.7bn, driven by 2.6% growth in BAU balances
- Unsecured lending increased 2.4% in Q3 to £6.3bn, driven by 3.9% growth in card balances
- Deposits 0.4% higher in Q3 at £67.3bn, with further growth in term deposits at competitive rates
Stable NIM despite tighter new mortgage spreads & deposit migration; FY23 guidance unchanged
- NIM remained stable in Q3 at 193bps (Q2: 194bps), supported by higher rates, including from reinvestment of structural hedge, balanced by mortgage spread pressure and deposit migration
- Continue to expect FY23 NIM of c.190bps, with stability across H2 compared to H1 (191bps)
Costs performing in line with expectations
- Continue to expect cost:income of 51-52% in FY23, with broadly stable costs in H2 vs. H1
- Costs in Q3 in line with H1 run-rate, supported by reduction in temporary costs flagged at H1 given service improvement, offset by higher regulatory investment and inflation
- Following recovery in service levels and in line with digital strategy, now accelerating restructuring activity, including 30% reduction in store network, supporting gross savings earning into FY24
Broadly stable credit quality; coverage further strengthened
- Overall credit quality remains broadly stable, supported by consistent underwriting criteria. Credit card arrears continue to gradually increase from low levels, in line with expectations at H1
- Provisions increased to £547m (Q2: £526m), driven mainly by higher modelled ECL in cards; coverage now 75bps (Q2: 72bps)
- £55m impairment charge in Q3; 30bps CoR (H1: 40bps); continue to expect c.35-40bps for FY23
- The Group is providing support for customers dealing with rising living costs, including the Mortgage Charter package of measures agreed with HM Treasury and other tailored solutions
Strong capital & funding position; now anticipate c.£175m of share buybacks for FY23
- Following second strong stress test result, expect c.£175m of share buybacks for FY23; comprising £50m today and c.£125 alongside FY23, subject to Board and regulatory approval
- Continue to expect to normalise CET1 ratio to 13-13.5% by FY24, supported by further buybacks
- CET1 ratio improved to 14.9% in Q3; c.(20)bps impact of £50m buyback will be recognised in Q4
- Robust funding and liquidity position; 12-month average LCR 143% and NSFR 136%
- Fitch updated VMUK’s outlook to positive; issued £500m RMBS at pricing in line with Tier 1 peers
Announcement authorised for release by Lorna McMillan, Group Company Secretary.
To read the full announcement click here
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