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Virgin Money reports 'good progress' despite fall in mortgage lending amid difficult market

The bank reported modest rises in credit card arrears

Virgin money branch(Image: handout from Virgin Money)

Lending has risen slightly at Virgin Money against what the bank has called a subdued market in which credit card arrears grew.

The bank - which has its main bases in Newcastle, Glasgow and Leeds - gave a third quarter trading update in which it said higher credit card balances and increased business lending on the back of winding down Government lending schemes had contributed. Overall customer lending grew to £72.5m in the period, up from £72.06m.

But at the same time mortgage lending fell slightly to £57.5bn, down from £57.7bn in Q3 2022. It said housing market activity was likely to remain "muted" in the short term thanks to higher rates but promised to support existing customers and manage its mortgage portfolio profitability despite the challenging trading conditions.

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Separately, the bank saw a gradual increase in credit card arrears - a trend it said was expected given low pandemic levels. Its provision for bad debts increased to £547m, up from £526m in the previous quarter.

Investors on the London Stock Exchange were told that on the back of a strong capital position, Virgin intended to launch about £175m of share buybacks, starting with £50m immediately and about £125m alongside its full year results.

The moves come amid a major restructuring of Virgin's high street branch estate in which it plans to close 39 sites across the country, about 30% of its network. The cost of those closures is expected to be around £275m, of which about £140m of which is still to be incurred in the second half of the year.

David Duffy, Virgin Money chief executive officer, said: "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.