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Virgin Money Group 2016 Results


Virgin Money Holdings (UK) plc announces strong financial performance supported by continued growth in high-quality lending

  • Underlying profit before tax increased by 33 per cent to £213.3 million, from £160.7 million in 2015
  • Customer loan balances increased by 19 per cent against continued strict underwriting principles
  • Customer base increased by 15 per cent to 3.3 million at rate of over 35,000 customers per month, driven predominantly through digital channels
  • Overall Net Promoter Score (NPS) improved to +29 from +19, making Virgin Money one of the leading UK retail banks for customer advocacy

Financial Highlights

  • Underlying profit before tax increased by 33 per cent to £213.3 million, from £160.7 million in 2015.
  • Underlying return on tangible equity increased to 12.4 per cent, from 10.9 per cent in 2015.
  • Underlying cost:income ratio improved to 57.2 per cent, from 63.5 per cent in 2015.
  • Statutory profit before tax increased to £194.4 million, compared to £138.0 million in 2015.
  • Underlying basic earnings per share increased to 32.7 pence, compared to 26.8 pence in 2015.
  • The Board recommends a final dividend of 3.5 pence per ordinary share. The total dividend for the year will be 5.1 pence per ordinary share, an increase of 13 per cent compared to 2015.
  • Common Equity Tier 1 ratio of 15.2 per cent and a leverage ratio of 4.4 per cent as at 31 December 2016.

Jayne-Anne Gadhia, Chief Executive at Virgin Money, said:

"I am delighted to report another very successful year for Virgin Money in 2016. Our customer-focused strategy of growth, quality and returns continues to achieve and maintain outstanding customer approval ratings, excellent asset quality and strong financial performance. We recorded market-beating growth in our core mortgages, savings and credit card businesses to deliver a 33 per cent increase in underlying profit before tax to £213.3 million and strengthen our underlying return on tangible equity from 10.9 per cent to 12.4 per cent.

"We continue to target high quality lending growth and the combination of strong new mortgage lending and improved customer retention resulted in 17 per cent growth in mortgage balances to £29.7 billion, significantly outpacing the market. Our credit card business continues to flourish and 55 per cent growth in prime credit card balances to £2.4 billion means we remain well-placed to reach our target of £3 billion high-quality credit card balances at the end of 2017. The performance of our Essential Current Account was particularly strong and customer balances increased more than fivefold over the year. Our savings franchise continues to perform with 12 per cent growth in deposit balances to £28.1 billion and we are pleased with the increasing contribution and momentum in our Financial Services business.

"We increased our overall customer base by 15 per cent to 3.3 million, supported by growth in customer numbers across every product category. Our continued focus on delivering excellent customer service led to new highs in customer advocacy with our overall Net Promoter Score improving to +29, making us one of the best-rated retail banks in the UK.

"We are confident of sustaining strong asset growth and maintaining our excellent asset quality. We are excited about the strategic opportunities ahead of us including the build of our digital bank, which will be transformational for the business, and our partnership with Virgin Red, which will give our customers access to great deals from across the broader Virgin Group of companies. We will continue to put customers at the heart of everything we do and remain on track to sustain a solid double-digit return on equity in 2017."

Delivered strong growth in customer balances

  • Mortgage balances increased by 17 per cent to £29.7 billion.
  • Gross mortgage lending grew by 12 per cent to £8.4 billion, a market share of 3.4 per cent.
  • Net mortgage lending grew by 20 per cent to £4.3 billion, a market share of 11 per cent.
  • Retail deposit balances increased by 12 per cent to £28.1 billion.
  • Credit card balances increased to £2.4 billion, up 55 per cent, a 3.5 per cent market share.

Maintained our high-quality balance sheet, underpinned by robust asset quality

  • Strong capital position, with a Common Equity Tier 1 ratio of 15.2 per cent at 31 December 2016.
  • Total capital ratio of 20.4 per cent and a leverage ratio of 4.4 per cent at 31 December 2016.
  • Low overall cost of risk at 0.13 per cent reflects our excellent credit quality, driven by our conservative risk appetite and prudent underwriting.
  • Mortgage arrears remained at low levels, with loans over three months in arrears of 0.15 per cent compared with the latest industry average of 1.00 per cent.
  • Credit cards cost of risk improved to 1.70 per cent in 2016, from 2.00 per cent in 2015, reflecting the continued high quality of the book.

Continued to pursue our ambition of making 'everyone better off'

  • Customers: total customer numbers increased to 3.3 million and overall NPS improved to +29 from +19 in 2015.
  • Communities: helped charities raise £92 million in 2016 through Virgin Money Giving, Virgin Money's not-for-profit online donation service. The Virgin Money Foundation has now distributed grants worth almost £2 million in the North East of England since August 2015.
  • Corporate partners: awarded the prestigious 'Best Lender Award' at the Legal & General Mortgage Club Awards for the second year running.
  • Colleagues: maintained strong colleague engagement with an overall engagement score of 81 per cent, which benchmarks strongly against UK high performing companies.


  • Our strategy of growth, quality and returns is clear and unchanged. We will continue to target 3 to 3.5 per cent of high-quality gross mortgage lending, ahead of our market share of stock. We will maintain the application of strict underwriting standards to protect asset quality as we progress towards our target of £3 billion credit card balances by the end of 2017. As a result of the strength of the business, our operating leverage and our continued ability to manage our cost base, we remain well-placed to maintain a solid double-digit return on tangible equity (RoTE), somewhat ahead of the 12.4 per cent RoTE achieved in 2016.
  • As a UK retail bank focused on serving domestic customers, the decision to exit the EU does not directly impact on our business. Whilst the UK economy proved resilient during the second half of the year, the eventual timing and nature of the UK’s exit from the EU remains unclear and the longer-term impact on the economy is uncertain.
  • We are sufficiently nimble to adjust to changes in the operating environment and will continue to target high-quality growth opportunities in value accretive market segments.
  • Following the successful build of our credit card business, enhancing Virgin Money’s digital capability is now a key focus having entered into a strategic partnership with 10x Future Technologies to build a scalable, integrated digital banking platform. Over 82 per cent of total sales were carried out digitally in 2016 and the enhancement of our online and mobile distribution will help us continue to serve our customers’ emerging needs.
  • Despite the current prolonged period of low interest rates we achieved a net interest margin (NIM) of 160 basis points in 2016. Although asset spreads will continue to put pressure on NIM, we expect to continue offsetting this pressure through strong income growth, a cost:income ratio of 50 per cent exiting 2017, impairments of up to 20 basis points and drawing from the Term Funding Scheme. We expect our NIM for 2017 to be up to 160 basis points.
  • We are pleased with the increasing momentum in our Financial Services business and together with fee income from our lending products, other income should generate around 10 per cent of our total income.
  • Our philosophy regarding acquisitions is unchanged. We will consider potential opportunities that are a good fit with the business, value accretive and within our prudent risk appetite.

Consolidated Income Statement

£ million
£ million1
Net interest income519.0456.114
Other income67.967.41
Total income586.9523.512
Underlying profit before tax213.3160.733

1 On an underlying basis, 2015 other income has been restated to remove the impact of fair value gains and losses on financial instruments in line with 2016 treatment.

Consolidated Balance Sheet

At 31 Dec 2016
£ million
At 31 Dec 2015
£ million
Cash and balances at central banks786.3888.6(12)
Loans and receivables33,003.427,724.619
Available-for-sale financial assets858.81,296.9(34)
Total assets35,055.630,229.016
Liabilities and equity
Deposits from banks2,132.51,298.764
Customer deposits28,106.325,144.912
Debt securities in issue2,600.02,039.428
Total liabilities33,385.128,888.716
Total equity1,670.51,340.325
Total liabilities and equity35,055.630,229.016

Key Ratios

Net interest margin (%)1.601.65(5)bps
Underlying cost:income ratio (%)57.263.5(6.3)pp
Cost of risk1 (%)0.130.121bp
Statutory basic earnings per share (p)29.422.928%
Tangible net asset value per share (£)2.732.5419p
Common Equity Tier 1 ratio (%)15.217.5(2.3)pp
Leverage ratio (%)
Return on tangible equity (%)12.410.91.5pp

1 Defined as impairment charges net of debt recoveries divided by average gross balances for the period. Key ratios are presented on an underlying basis except where stated.

Reconciliation to Statutory Profit

£ million
£ million
Underlying profit before tax213.3160.733
IPO share payments(2.0)(10.5)
Strategic items(2.4)(8.1)
Simplification costs(5.6)(3.7)
Fair value losses on financial instruments(8.9)(0.4)
Statutory profit before tax194.4138.041

The Group uses a number of Alternative Performance Measures (APMs), in addition to underlying profit, in the analysis and discussion of its financial performance and financial position. APMs do not have standardised definitions and may not be directly comparable to measures defined within IFRS. A full list of APMs used by the Group, including their bases of calculation, are set out on page 267 of the 2016 Annual Report and Accounts.


Virgin Money Press Office
Scott Mowbray / Simon Hall
0191 279 4676 or

FTI Consulting
John Waples / Mitch Barltrop
07717 814520 / 020 3727 1039 or /

Virgin Money Investor Relations
Adam Key / Frederik Verpoest
020 7111 1311 / 0207 111 1310 or /


About Virgin Money

  • Virgin Money offers savings, mortgages, credit cards, current accounts, currency services, pensions, investments and protection products to 3.3 million customers across the UK.
  • Virgin Money’s business ambition is to make “everyone better off” – this philosophy underpins our approach to business by offering good value to customers, treating employees well, making a positive contribution to society and delivering a profit to shareholders.
  • More than 12,500 charities have registered with Virgin Money Giving and, by the end of 2016, over £500 million had been raised for charity through the service since its launch in 2009, resulting in an estimated £16 million more raised for charity because of its not-for-profit model.

Forward looking statements

This document contains certain forward looking statements with respect to the business, strategy and plans of Virgin Money and its current goals and expectations relating to its future financial condition and performance. Statements that are not historical facts, including statements about Virgin Money’s or its directors’ and/or management’s beliefs and expectations, are forward looking statements. By their nature, forward looking statements involve risk and uncertainty because they relate to events and depend upon circumstances that will or may occur in the future. Factors that could cause actual business, strategy, plans and/or results (including but not limited to the payment of dividends) to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward looking statements made by Virgin Money or on its behalf include, but are not limited to: general economic and business conditions in the UK and internationally; inflation, deflation, interest rates and policies of the Bank of England, the European Central Bank and other G8 central banks; fluctuations in interest rates (including low or negative rates), exchange rates, stock markets and currencies; the ability to access sufficient sources of capital, liquidity and funding when required; changes to Virgin Money’s credit ratings; the ability to derive cost savings; changing demographic developments, including mortality, and changing customer behaviour, including consumer spending, saving and borrowing habits; changes in customer preferences; changes to borrower or counterparty credit quality; instability in the global financial markets, including Eurozone instability, the potential for one or more countries to exit the European Union (EU) (including the UK following its EU referendum vote to leave the EU) or the Eurozone, and the impact of any sovereign credit rating downgrade or other sovereign financial issues; technological changes and risks to cyber security; natural and other disasters, adverse weather and similar contingencies outside Virgin Money’s control; inadequate or failed internal or external processes, people and systems; terrorist acts and other acts of war or hostility and responses to those acts; geopolitical, pandemic or other such events; changes in laws, regulations, taxation, accounting standards or practices, including as a result of the exit by the UK from the EU or a further possible referendum on Scottish independence; regulatory capital or liquidity requirements and similar contingencies outside Virgin Money’s control; the policies and actions of governmental or regulatory authorities in the UK, the EU, the US or elsewhere including the implementation and interpretation of key legislation and regulation; the ability to attract and retain senior management and other employees; actions or omissions by Virgin Money’s directors, management or employees , the extent of any future impairment charges or write-downs caused by, but not limited to, depressed asset valuations, market disruptions and illiquid markets; market relating trends and developments; exposure to regulatory scrutiny, legal proceedings, regulatory investigations or complaints; changes in competition and pricing environments; the inability to hedge certain risks economically; the adequacy of loss reserves; the actions of competitors, including non-bank financial services, lending companies and digital innovators and disruptive technologies; and the success of Virgin Money in managing the risks of the foregoing.

Any forward-looking statements made in this document speak only as of the date they are made and it should not be assumed that they have been revised or updated in the light of new information of future events. Except as required by the Prudential Regulation Authority, the Financial Conduct Authority, the London Stock Exchange plc or applicable law, Virgin Money expressly disclaims any obligation or undertaking to release publicly any updates of revisions to any forward-looking statements contained in this document to reflect any change in Virgin Money’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

Virgin Money Holdings (UK) plc - Registered in England and Wales (Company No. 03087587). Registered Office - Jubilee House, Gosforth, Newcastle upon Tyne NE3 4PL.