- Net interest margin faces pressure from lower base rate, higher costs
Virgin Money UK expects profitability to come under pressure in the second half of 2024, reflecting higher costs and investments.
The lender, which is in the process of a £2.9bn takeover by Nationwide Building Society, told investors on Tuesday it anticipates “downward pressure” on its net interest margin – a key measure of the lender’s profitability. banking sector – after a “strong” first semester. performance.
Strong credit card and business lending, as well as higher customer deposits, put NIM in the first half on track to hit “the upper end” of VMUK’s 190-195 basis point range, the bank said. lender.
Shareholders to vote on Nationwide acquisition on May 22
However, VMUK expects a weaker contribution from credit cards, lower interest rates, competition and “cost pressures from inflation and investment” to weigh in the coming months, which will only be partially mitigated by its cost reduction plans.
It continues to anticipate 5 to 10 percent growth across all business and unsecured loans for the full year, as first-half strength helps keep NIM in the 190 to 195 basis point range.
Boss David Duffy said: ‘Over the first six months we have continued to deliver our strategic ambitions in line with expectations.
“While we expect there to be headwinds in the second half of the year, we remain well positioned to generate growth in our target segments.”
Shareholders will vote on the Nationwide acquisition on May 22, ahead of the publication of VMUK’s interim results on June 13.
What is controversial, however, is that Nationwide members will not be able to vote on the acquisition.
Before the potential deal is completed, VMUK has ruled out an existing share buyback program and said it has no intention of announcing any further payments to shareholders.
It has also postponed certain restructuring activities.
VMUK, however, still expects to pay a full-year 2024 dividend of 2p per share, as announced by its board.
The firm said: “The group believes that Nationwide’s acquisition of Virgin Money presents an exciting opportunity to build on our significant strategic progress by combining two complementary businesses that together can offer more excellent products and services to a broader customer base. broad, while delivering value for our shareholders.’