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May 5 (Reuters) - British challenger bank Virgin Money
reported improved half-year earnings on Wednesday,
after setting aside less cash to cover pandemic-driven loan
losses and forecast improved margins over the year.
"We are cautiously optimistic about the improving outlook as
the impact of the vaccination programme in the UK delivers
positive revisions to economic expectations," Virgin Money Chief
Executive David Duffy said.
The bank, formed from the merger of Virgin Money and CYBG,
reported pre-tax profit of 72 million pounds ($100.12 million)
for the six months ended March 31, compared to a 7 million pound
loss a year earlier when it made hefty provisions for potential
soured loans.
Virgin Money took an impairment charge of 38 million pounds
in the half-year period, much lower than the 232 million pounds
booked a year earlier.
While big banks including Lloyds and HSBC
have released provisions due to the better-than-feared economic
outlook, smaller lenders are yet to follow suit.
Virgin Money's rival Metro Bank last week said it
was starting to see improvement across its loan book as
restrictions eased, but gave no update on provisions.
Virgin Money said the vast majority of its customers who
were on payment holidays have resumed payments.
Its net interest margin (NIM) - a key measure of
profitability - dipped to 1.56% from 1.62%, as record low
interest rates set by the Bank of England hurt challenger banks,
who rely on margin on lending the most.
Larger lenders offer other financial services, such as
wealth management or investment banking, which have cushioned
the hit to margins from low interest rates.
Still, Virgin Money guided NIM would be around 1.60% for the
full year, while forecasting costs of less than 890 million.
($1 = 0.7192 pounds)
(Reporting by Muvija M in Bengaluru, Editing by Iain Withers)
