Virgin Money expects to benefit from reduced costs in the second half

Feb 1 (Reuters) – Virgin Money UK Plc (VMUK.L) said on Wednesday it expected the second-half period of the current financial year to benefit from lower costs, after the British lender reported a slight 0.7% lending growth in the first quarter.

The sixth largest bank in the UK said it set aside an additional 66 million pounds ($81.27 million) for the quarter ended Dec. 31 to cover potential bad loans.

Investors are wary that an economic crunch in Britain could lead to higher loan defaults and dented bank finances, with official budget forecasters predicting households to face a record hit to living standards over the next two years.

However, lenders have also benefited from higher rates designed to curb rampant inflation, as they profit on the gap between what they charge on lending and pay out on deposits.

The Bank of England is likely to raise its main interest rate by half a percentage point to 4% on Thursday, its 10th consecutive rate rise, starting from a record-low 0.1% in December 2021.

The company, born out of the merger of CYBG and Virgin Money, reiterated its annual net interest margin outlook of 185-190 basis points.

The lender said the second-half period ending Sept. 30 would benefit from lower costs related to the completion of its investment in mortgage digitization as well as reduced temporary expenses to support service and delivery of cost-saving measures.

($1 = 0.8123 pounds)

Reporting by Prerna Bedi and Aby Jose Koilparambil in Bengaluru; Editing by Rashmi Aich

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