Virgin Money profits dive after larger than expected jump in bad loan provisions

Virgin Money’s profits fell by a quarter as a larger than expected jump in provisions for potential bad loans offset a boost to the UK lender’s revenue from rising interest rates.

Statutory pre-tax profits fell 25 per cent to £236mn for the six months to March 31, beating analysts’ estimates of £226mn. Revenues rose 10 per cent to £933mn, the challenger bank said on Thursday. The consensus was for £911mn.

Provisions for bad loans increased nearly sixfold to £144mn from £21mn in the same period in 2022, above expectations of £129mn.

Virgin Money anticipates arrears to increase based on economic conditions and credit bureau data.

The board of the FTSE 250 lender, which in November announced a 7.5p per share dividend for 2022, recommended an interim dividend of 3.3p per share.

It plans to reward investors with a 30 per cent full-year dividend payout ratio this year and expects further share buybacks throughout the year, subject to the Bank of England’s stress tests.

Shares in Virgin Money have fallen 16 per cent this year, having been hit by fears of wider contagion in the banking sector after the collapse of Silicon Valley Bank and trouble at other lenders, including Credit Suisse.