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Virgin Money: Trading update and 2012 full year results


Virgin Money Holdings (UK) Limited (the “Company”) has today announced a trading update as at 31 May 2013 and also released full year results for 2012 – the first set of results since the acquisition of Northern Rock plc.

Between the acquisition of Northern Rock plc on 1 January 2012 and 31 May 2013, Virgin Money has:

Delivered significant new customer account growth, supported by an improved customer experience

  • 1.7 million new customer accounts opened
  • All Northern Rock branches transformed into Virgin Money stores
  • Significant investment in the in-store and Lounge customer experience, resulting in an 8% increase in footfall
  • Integration and rebranding of the Northern Rock and Virgin Money businesses completed successfully

Grown retail deposit balances strongly, at a CAGR of 14%

  • Strong growth in sales in all distribution channels; online, telephone and store, supported by the Company’s channel-neutral pricing philosophy

Grown mortgage balances strongly, at a CAGR of 19%

  • Mortgage balance growth is accelerating, 2013 net lending to-date is 14% higher than the same period in 2012
  • Virgin Money is the UK’s third largest net mortgage lender, and has drawn down £710 million from the Funding for Lending scheme
  • Organic growth success supplemented with the acquisition of £466 million of prime quality mortgage assets from UKAR in July 2012

Improved the Net Interest Margin (NIM) of the Company

  • NIM improved through ongoing business development and the acquisition of £1 billion of Virgin credit card assets from MBNA Ltd as part of the foundation of Virgin Money’s own-operated credit card business

Maintained a Core Tier 1 ratio that makes Virgin Money one of the best capitalised banks in the UK

  • Strong liquidity position and robust capital ratios have been maintained – the Company’s loan to deposit ratio is 97% and Core Tier 1 capital ratio is 18%

Improved the Company’s leverage ratio

  • The Company’s leverage ratio is comfortably above the expected Basel III minimum, at 4.0%

Helped fundraisers raise £200 million for charities through Virgin Money Giving

  • Over 6,500 charities now use Virgin Money Giving
  • Over £200 million (including Gift Aid) has been raised, with an extra £6 million delivered to charities due to Virgin Money Giving’s not-for-profit status

Returned the Company to profitability

  • A position of monthly profit was delivered in Q4 2012, with an annual underlying profit expected to be reported for 2013.

Virgin Money trading update since the acquisition of Northern Rock plc on
1 January 2012

New customer accounts opened (cumulative)N/A+1.2 million+ 1.7 million
Retail deposit balances (£m)16,17518,00719,469
Mortgage balances (£m)13,94616,76117,851
Funding for lending drawdown (cumulative - £m)-510710
Net interest margin0.35%0.54%1.15%
Loan:deposit ratio84%93%97%
Core Tier 1 capital ratio18.3%16.4%18.1%
Leverage ratio3.7%3.4%4.0%
Virgin Money Giving donations (cumulative since launch - £m)87159201
Underlying loss before tax (£m - combined business)(59.1)(8.4)*

* A return to annual profitability on an underlying basis is forecast for 2013.

Jayne-Anne Gadhia, Chief Executive Officer said:

“We believe that banks should be retail-focused with strong, simple balance sheets; and that they should be well capitalised and capable of building consumer trust by delivering fair, straightforward products with transparent pricing. We believe it is this approach that has driven our business forwards, supported the acquisition of new customers and the retention of existing ones, and allowed us to make a strong start on our quest to make banking better.

“Since we acquired Northern Rock on 1 January 2012, we have successfully integrated the two businesses under the Virgin Money brand and have focused on bringing real competition to UK banking. We have transformed all of Northern Rock’s branches into Virgin Money stores, supporting the local communities we serve. We have protected the jobs of our 2,500 existing staff as we promised, and created 200 new roles. We have also been able to provide real support to the UK housing market, surpassing the net lending levels of most of our high street competitors. Most importantly, we have been able to return the business to profitability.

“The acquisition of a £1 billion credit card portfolio at the start of 2013 provides the platform for the launch of our own credit cards business. This launch of a cards business, as well as our plans to enter the current account market, will further enhance our ability to meet the needs of consumers across a broad range of retail financial products. We are well positioned for continued strong growth and look forward with great optimism.”

2012 Annual Report and Accounts

Virgin Money has today published its full Annual Report and Accounts for 2012.

These are available at PDF

In order to provide meaningful and relevant comparisons, Group results for 2011 have been adjusted to present a view of the combined business as if Northern Rock had been acquired on 1 January 2011.

Financial performance during 2012

  • Strong growth in profitability across the year, the combined business traded profitably during Q4 2012
  • The underlying loss of the combined business, before exceptional items and tax, was reduced to £8.4 million in 2012, from £59.1 million in 2011, ahead of the Company’s financial plan for the year
  • The statutory profit before tax, including exceptional items, was £150.6 million in 2012, compared with £23.5 million in 2011
  • Virgin Money is a safe and secure business, with a Core Tier 1 capital ratio of 16.4% and a Tier 1 capital ratio of 19.9% at 31 December 2012

Mortgage lending during 2012

  • Virgin Money continued to support the mortgage market during 2012, achieving gross mortgage lending of £4.9 billion, an increase of 32% compared with Northern Rock plc's gross lending of £3.7 billion in 2011
  • Net mortgage lending of £2.3 billion represented 31% of UK net mortgage lending, and increased mortgage balances to £16.8 billion at 31 December 2012
  • Credit quality remained strong, with loans over three months in arrears representing 0.37% of accounts at 31 December 2012 (compared with the CML average of 1.91%)

Funding during 2012

  • Savings balances grew by £1.8 billion during the year to £18.0 billion (from £16.2 billion, excluding Irish deposits sold on 3 January 2012)
  • Retail savings remained in excess of mortgage balances, with a loan-to-deposit ratio of 93% at the end of 2012
  • Two successful issues of residential mortgage-backed securities raised £1.7 billion in total

Integration programme

  • The integration of Virgin Money and Northern Rock was completed successfully during the year
  • The Northern Rock business was fully rebranded as Virgin Money; including the branch network, the customer and intermediary websites, all IT systems, ATMs and all marketing materials


Media Contacts:
Press office: Tel: 0191 279 4676

About Virgin Money

  • Virgin Money provides savings, mortgages, credit cards, pensions, investment and protection products to over four million customers
  • Virgin Money’s business ambition is to make “everyone better off” – this philosophy underpins our approach to business as we aim to offer good value to customers, treat employees well, make a positive contribution to society and deliver a profit to our shareholders
  • Virgin Money is the official sponsor of the London Marathon, the biggest annual fundraising event in the world. Virgin Money aims to help runners raise over £250 million over 5 years and will use its infrastructure, online capability and financial expertise to deliver that through Virgin Money Giving

Virgin Money Holdings (UK) Limited registered in England and Wales under company number 03087587.
Registered Office: Discovery House, Whiting Road, Norwich, NR4 6EJ.