Virgin Money reported a decline in lending during the third quarter of 2024, aligning with strategic restructuring as it prepares for integration with Nationwide Building Society.
The bank’s focus on unsecured lending growth, alongside stabilised arrears, highlights a shift in financial dynamics amid ongoing strategic developments.
Strategic Performance in Q3
Virgin Money experienced a slight decline in customer lending during the third quarter of 2024, marking a 0.9% reduction compared to the first half of the year, totalling £72.04 billion. This contraction was primarily driven by reductions in mortgage lending, which fell by 1.1%, amounting to £56.01 billion. Business lending also decreased by 1.1%, totalling £9.21 billion. Chief Executive, David Duffy, affirmed the bank’s strategic progress remains on track, signalling a focus on innovative products and maintaining momentum.
Unsecured Lending and Arrears Stabilisation
Notably, unsecured lending saw an 8.2% growth, spurred by an increase in credit card usage. The trend in arrears stabilised, with a reduction in customers in credit card arrears. This indicates a positive outlook in credit management, as the bank also reported a downgrading of credit provisions to £611 million, down from £616 million in the preceding half. This stabilisation is an encouraging sign amid broader lending declines.
Innovative Offerings and Strategic Partnerships
The bank introduced a ‘fully digitised personal loans proposition’ last month, with plans to rejoin the open market for personal loans later this year. This move is aimed at tapping into the growing demand for digital financial solutions. Additionally, a strategic partnership with Experian was established, leveraging the latter’s data and cloud technology to enhance the digital experience for unsecured lending customers. These initiatives highlight Virgin Money’s commitment to staying at the forefront of financial innovation.
Operational Adjustments and Financial Implications
The adjusted cost-income ratio rose by 2% to 54% due to inflation-related cost pressures and the deferral of cost savings. The bank managed £10 million in restructuring costs, in addition to £10 million allocated for a financial crime prevention programme. These financial undertakings demonstrate the bank’s commitment to robust operational frameworks and crime prevention.
Merger with Nationwide Building Society
The pending acquisition by Nationwide Building Society is progressing as expected, following recent clearances. Virgin Money is awaiting final regulatory approvals from the Prudential Regulation Authority and Financial Conduct Authority. This £2.9 billion merger is on track to finalise in the last quarter of the year, after which the bank expects further transaction-related adjustments, including expenses linked to brand licenses from Virgin Enterprises.
Future Outlook and Market Position
Virgin Money’s temporary pause on some restructuring activities post-branch closures is strategically aligned with the ongoing merger talks. Despite these pauses, the bank maintains a vigilant outlook on developing market trends and customer needs. The completion of the Nationwide merger is anticipated to further consolidate its market position, providing it with a robust platform for future growth.
Virgin Money’s third-quarter results reflect a mixed bag of outcomes, with a decrease in lending but growth in unsecured credit. The stability in arrears and strategic steps towards innovation and partnership underscore an adaptive approach as it navigates through impending market changes. The bank’s ongoing merger with Nationwide Building Society is set to culminate soon, promising a strengthened position in the financial services sector.
