Virgin Money Holdings UK Plc, the lender backed by billionaire Richard Branson, reported a 41 percent increase in annual profit as it grew mortgage and credit card lending.
Pretax profit rose to 194.4 million pounds ($242 million) in 2016 from 138 million pounds a year earlier, the Newcastle, England-based bank said in a statement on Tuesday. Lending increased by 19 percent to 33 billion pounds driven by mortgage sales, while customer deposits gained 12 percent to 28.1 billion pounds.
Virgin Money has grown rapidly since Branson expanded his business empire in 2011 with the acquisition of nationalised lender Northern Rock Plc, pitting his firm against the nation’s largest banks. While the company would probably look at the sales process of Co-Operative Bank, which put itself on the market earlier this month, it doesn’t need deals to grow, Chief Executive Officer Jayne-Anne Gadhia said in an interview.
“It would be something we’d look at once it’s got any process out there, I’m sure,” Gadhia said. “Who knows where that might lead. The key thing is we’re very happy with our organic plan. So we’ve got no need to take any risk in acquisition at all.”
Virgin Money was up 1.1 percent to 338.4 pence at 9:47 a.m. in London trading, bringing its gain for the year to 11.8 percent.
The CEO said Virgin Money would now look at entering the U.K. market for small and medium-sized business lending after scrapping plans to lend to such firms in the aftermath of the European Union referendum in June. That’s because the nation’s economy has performed better than anticipated and Royal Bank of Scotland Group Plc this month said it plans to create a fund to help challenger banks lure its SME customers.
“If there is an opportunity as a result of RBS transaction to think again about SME lending, then we’ll certainly do that,” she said. It’s too early to gauge the benefits her bank could reap from the program, which will provide funding and incentives for clients to switch lenders, because the EU has yet to approve the plan, Gadhia said.
Pretax profit, excluding one-time items, rose to 213.3 million pounds from 160.7 million pounds a year ago. The dividend for the year was raised 13 percent to 5.1 pence per share, while the common equity Tier 1 capital ratio, a measure of financial strength, fell to 15.2 percent from 15.3 percent at the end of June.
Written by Richard Partington – UK banking reporter at Bloomberg News.