Virgin Money UK PLC returns to profit as bad loan provisions are trimmmed

() returned to profit in the first quarter of its financial year but maintained its cautious economic outlook.

The challenger bank said it remained prudently positioned but was able to report a statutory profit after making no new provisions for bad debt, indeed its mortgage provisions are slightly lower.

Customer deposits increased 0.9% to £68.1bn in the three months to end-December, 2020, as further COVID-19 restrictions drove lower personal customer spending.

Mortgage lending reduced 0.2% to £58.2bn and personal lending fell 2% to £5.1bn, though business lending rose 0.1% to £8.9bn.

Mortgages were slightly curtailed as the bank said it focused on “margin management and prudent underwriting standards given the uncertain macroeconomic outlook”.

Net interest margin (NIM), the difference between the interest rate of lending and borrowing, was stable in the quarter at 1.52%, which was put down to higher liquidity and lower hedge contributions offset by an improving mix and cost of deposits, and supportive mortgage spreads.

The CET1 capital ratio increased 50 basis points to 13.9% despite a £49mln charge for PPI in the period.

Chief executive David Duffy said: “We have made a good start to the year with the launch of new customer propositions, further roll-out of our rebrand programme and a return to statutory profit, while maintaining a disciplined approach.”

Given the current UK-wide lockdown and ongoing uncertainty, he said the bank was maintaining its cautious economic outlook outlined in November, with full-year guidance broadly unchanged.