(Sharecast News) - Shares in Virgin Money slumped on Thursday as the challenger bank posted lower first-half profits due to an increase in impairment charges for bad debts and higher investment costs.
The bank posted pre-tax profits of £236m compared with £315m a year earlier. Provision for bad debt surged to £144m from £21m, as Virgin updated economic assumptions with some signs of a modest increase in arrears on customer credit cards. Shares in the firm fell almost 7.5% in early London trade having plunged almost 11%.
Virgin's results contrast sharply with major High Street competitors, which have all posted soaring profits in the last two weeks on the back of higher interest rates, although they all reported falls in deposits as customers look for better returns on savings among a sector notoriously slow to pass on rate hikes to investors.
Higher interest rates drove an improvement in income to £933m, up 10%, while the bank's net interest margin - the difference between what it charges for loans and pays on deposits - grew by eight basis points to 1.91%.
The bank increased its outlook for its 2023 NIM to about 190 basis points, compared with the previous estimate of about 185 to 190 basis points.
Reporting by Frank Prenesti for Sharecast.com