FILE PHOTO: People walk past a Virgin Money store in central London, Britain, July 27, 2021. REUTERS/Henry Nicholls
February 1, 2022
By Sinchita Mitra and Yadarisa Shabong
(Reuters) -British bank Virgin Money said on Tuesday credit card spending was back to pre-pandemic levels thanks to pent up demand, while rising interest rates helped to lift its margin forecast for the year.
Spending on credit cards had taken a hit since the onset of the pandemic as people poured money into savings and investments, while cancelling travel plans and spending less in lockdowns.
But easing restrictions have boosted consumer and business confidence.
Finance chief Clifford Abrahams told Reuters the bank was seeing travel spending on its credit cards return to levels achieved before COVID-19.
“Customers who are feeling good about their jobs, about the prospective wage increases, some of them have money on deposit, so they are willing to spend,” Abrahams said.
Virgin Money forecast that its net interest margin (NIM) – a key measure of a bank’s underlying profitability – will be about 175 basis points in the year to September 2022.
The outlook comes as the Bank of England raised interest rates in December, with more increases expected to follow to combat rising inflation.
Analysts said Virgin Money’s first-quarter trading update for the three months to December set a broadly positive tone for the industry ahead of rivals’ full-year earnings later this month.
“We view the recovery in unsecured balances as a helpful read-across for Barclays and Lloyds within the UK banks,” analysts at JPMorgan Cazenove said in a note.
Virgin Money’s shares rose 3% in early trading before losing momentum, and were broadly flat at 1200 GMT.
The British bank, which has already launched instalment lending on its credit cards, plans to offer a subscription-based digital credit product in the next few quarters mainly for younger people looking to build their credit scores.
“Younger people want to build their credit history while looking to stay in control,” Abrahams said.
The bank, which in November said it was looking to digitalise its services at a faster pace, also said new accounts opened exceeded 132,000 in the quarter – the highest since the start of the pandemic.
Virgin Money, formerly known as CYBG, saw a decline in mortgages lending and business lending owing to a fall in government-backed lending in the sector and weaker market demand.
(Reporting by Sinchita Mitra and Yadarisa Shabong in Bengaluru; editing by Milla Nissi and Jane Merriman)