Virgin Money profits landmark
PUBLISHED: 15:27 05 March 2014 | UPDATED: 15:27 05 March 2014
The top boss of Virgin Money has hailed the market-beating growth of its mortgage and savings business as it recorded its first underlying profit since its takeover of Northern Rock.
The EDP Top 100 firm, which bought the former failed lender from the government for an initial £820m in 2011, made an underlying profit of £53.4m, against losses of £2.5m a year earlier.
Virgin said retail savings balances were up 17pc to £21.1bn – in excess of market growth of 5pc – while mortgage balances rose 17pc to £19.6bn, compared with market growth of 1pc.
The group also reported progress in its credit cards business after it completed the acquisition of £1bn of Virgin Money credit cards from its partner MBNA.
Chief executive Jayne-Anne Gadhia, who received a pay package worth £1.2m last year, said the group had maintained its “strong momentum” in mortgages and savings.
“During the year, we maintained the strong momentum that we have established in our core mortgages and savings business, while investing in building the banking capabilities which will enhance our future growth potential. In mortgages and savings, we achieved growth well above that seen across the market as a whole, improved net interest margins, controlled cost growth by leveraging our existing infrastructure and maintained a very low level of impairment losses. We have also developed the infrastructure to support our first current account, which we are now trialling with our colleagues.”
According to the company’s annual report, her base salary will rise from £550,000 to £637,000 this year but the maximum bonus will be cut to 200pc of salary - from 300pc previously - in line with new European rules. The overall maximum figure available is unchanged at £2.3m.
Virgin Money employs more than 2,500 staff, with 1,700 people based at Gosforth near Newcastle and another 200 at Norwich.
The business acquired a network of 75 branches, a £14bn mortgage book and retail deposits worth £16bn when it bought Northern Rock in late 2011. But the failed lender’s multibillion pound book of toxic loans was left in state hands to be wound down.
Virgin said its proportion of mortgages three or more months in arrears was 0.35pc, well below the industry average. The bank also has a core tier one capital ratio - a key measure of financial strength - of 16.2pc, putting it among the best-capitalised lenders in the UK.
Meanwhile its net interest margin – which measures the gap between its lending profits and borrowing costs – has increased on mortgages and savings to 0.95pc from 0.54pc in 2012.