FTSE 250 listed Virgin Money UK returned to profit as benefitted by reduced impairment charges

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 FTSE 250 listed Virgin Money UK returned to profit as benefitted by reduced impairment charges
Image source: Blue Planet Studio,Shutterstock


  • VMUK had reported an underlying profit of £245 million during H1 FY21.
  • The RoTE (“Return on Tangible Equity”) stood around 10.1% during H1 FY21.
  • VMUK had maintained an underlying cost to income ratio of approximately 62% during the period.

Virgin Money UK PLC (LON: VMUK) is the LSE listed financials stock. VMUK’s shares have generated a return of around 171.17% in the last 12 months. VMUK is listed on the FTSE 250 index.

 Company Overview

Virgin Money UK PLC is a UK based Company that provides a diverse range of banking services catering to both retail and institutional clients.

(Source: Company presentation)

Key Financial & Operational Highlights (for six months ended 31 March 2021, as of 05 May 2021)

Robust profitability achieved during H1 FY21 - VMUK highlighted that it had witnessed a turnaround and returned to profitability during H1 FY21. The underlying profit had jumped by more than 100% and reached £245 million during H1 FY21, while it was around £120 million during H1 FY20. Moreover, the increase was due to a substantially low impairment charge during the period. The impairment charge remained approximately £38 million during the period.

Improvement in RoTE and ROA - VMUK had shown significant improvement in RoTE (“Return on Tangible Equity”) as it had reported RoTE of 10.1% during H1 FY21 as compared to 4.6% for H1 FY20. Furthermore, the underlying Return on Assets (“ROA”) had demonstrated a significant improvement of 22 basis points to 0.47% during H1 FY21 as compared to an equivalent period of FY20.

Robust Balance Sheet – VMUK had maintained a substantial credit provision of £721 million as of 31 March 2021, while it was £735 million as of 31 March 2020. The net interest margin stood around 1.56% during H1 FY21. On the efficiency front, the Company had maintained an underlying cost to income ratio of approximately 62% during the period. Furthermore, the liquidity coverage ratio had demonstrated an improvement of 1200 basis points from 139% as of 31 March 2020 to 151% as of 31 March 2021. The capital position also remained robust as it had reported a CET1 ratio of around 14.4% during the period.

Share Price Performance Analysis of Virgin Money UK PLC

(Source: Refinitiv, Thomson Reuters)

VMUK shares were trading at GBX 190.25 and were down by close to 5.21% as of 05 May 2021 at 11:33 AM GMT. VMUK’s 52-week Low and High were GBX 64.38 and GBX 206.09, respectively. Virgin Money UK PLC had a market capitalization of around £2.89 billion.

Business Outlook

VMUK had anticipated net interest margin to remain around 160 basis points during FY21. Moreover, VMUK expected a benefit in Net Interest Income (“NII”) of around £25 million during FY21 and £60 million in FY22. Furthermore, the underlying operating expenses were estimated to remain around £890 million during FY21. The Company would emphasize long-term cost reduction from digital transformation initiative. The CET1 ratio was anticipated to remain more than 13% during FY21. VMUK would consider paying dividends after analyzing the impairment outlook. Overall, VMUK would focus on building strong momentum in the strategic delivery and accelerate the growth trajectory based on deep customer relationships.


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