Virgin Money lending slows amid controversial Nationwide takeover

Virgin Money has seen a slowdown in customer lending as it approaches its final months as an independent, publicly traded company.

The lender is due to be acquired by Nationwide in the final three months of the year following regulatory clearance last month, and the £2.9bn deal proved controversial as a result of the building society’s decision to deny members a vote.

Virgin Money saw lending to customers fall 0.9 percent to around 72 billion pounds in its third quarter to June 30, with mortgage and business lending each contracting by 1.1 percent.

The lender told investors the slowdown in mortgage lending reflected a “disciplined approach to trading to protect overall spreads” and “higher repayments given the rate environment”, while the drop in commercial lending was the result of “seasonal effects”.

Total lending was supported by 1.3 per cent growth in unsecured loans to £6.8bn, thanks to strong credit card lending.

Virgin Money also enjoyed deposit growth of 2.4 per cent over the period, taking its total to £69.8bn, “reflecting strong demand for ISAs at the start of the new financial year”.

Chief executive David Duffy said: “We achieved continued growth in deposits and unsecured lending in the third quarter and remain focused on developing innovative new products for customers and maintaining good momentum in the fourth quarter.”

Costs rose modestly over the period, with banks’ adjusted cost-to-income ratios rising to 53 percent from 51 percent, as a result of “inflationary headwinds and the deferral of cost savings.”

Virgin Money faces a notable charge of £32 million during the quarter, of which £10 million reflects restructuring costs.

In the third quarter, it recorded a net interest margin (the difference between interest accrued on loans and interest paid on loans) of 1.89 percent, compared with 1.94 percent previously.

Duffy said: ‘Our strategy remains on track, with financial performance in line with expectations.

‘The acquisition by Nationwide is progressing as planned with recent CMA clearance, and we expect completion in the final quarter of the calendar year.’