Britain's Virgin Money sees mortgage activity picking up
Reuters
Published Feb 06, 2024 07:27
Updated Feb 06, 2024 09:35
(Reuters) -British bank Virgin Money (LON:VMUK) UK has seen a pick up in mortgage activity as rates start to fall, but retained a cautious tone on Tuesday, sticking with its full-year profit margin guidance.
Last week, the Bank of England said average UK mortgage rates fell in December for the first time since November 2021 and that the number of mortgages approved by lenders was the highest since June.
Virgin, Britain's sixth-largest lender, said mortgage application volumes jumped 30% year-on-year last month.
However, it kept its forecast for net interest margin (NIM) - a key indicator of underlying profitability - at 1.90%-1.95% for the year to the end of September.
"We're not expecting a housing boom and we still expect house prices to moderate, but with sentiment improving. The logjam seems to have broken, which is encouraging," Chief Financial Officer Clifford Abrahams said in an interview.
There are early signs in January that market activity has improved, including market applications volumes more in line with 2019 levels within both residential lending and more recently buy-to-let, the company said.
Virgin Money has targeted growth in business and unsecured lending - including credit cards and through the launch of a buy-now-pay-later product - while taking a cautious approach to the mortgage market.
It booked an impairment charge of 64 million pounds ($80 million) in the first quarter ended Dec. 31, mainly in its unsecured lending business which includes credit card arrears.
The bank also hinted at more job cuts during the year, without specifying a number, as part of its cost-cutting drive and said it expected to announce further share buybacks in the second half.
"While at one level it is always a relief to note that performance has been as expected and that FY24 guidance has been reaffirmed, we think the somewhat cautious tone on NIM as well as the gradual increase in credit card arrears may weigh a little," said Goodbody analyst John Cronin.
Shares in the company, part of the FTSE mid-cap index, were last up 1.5%.
($1 = 0.7967 pounds)
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Written By: Reuters
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