Virgin Money share price rises as mortgage lending jumps: More proof challenger banks are winning?

Emma Haslett
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The bank has already gone the way of its larger rivals with the sponsorship of the London Marathon, one of the UK's largest sporting events (Source: Getty)

The "Big Four" have good reason to worry about challenger banks, after Virgin Money announced net mortgage lending almost doubled in the nine months to the end of September.

The figures

Gross mortgage lending jumped 38 per cent to £5.5bn in the first three quarters of the year, the bank said today, with net mortgage lending rising 98 per cent to £2.6bn. That put the bank's share of gross mortgage lending in the first eight months of the year at 3.5 per cent.

Meanwhile, retail deposits increased three per cent during the third quarter, to £23.7bn.

Jayne-Anne Gadhia, the bank's chief executive, said the bank was on track to hit a target of increasing its credit card business to £3bn of balances by the end of 2018.

Why it matters

As banks battened down the hatches during the worst years of the financial crisis, a group of plucky young upstarts began the process of taking their place, targeting the unloved and forgotten (ie. mortgage borrowers and small firms).

Over the past year that same group has taken the next step: Virgin Money became one of the first of a clutch of challengers to list on the London Stock Exchange in November last year (although TSB had IPOd in June), closely followed by Shawbrook and Aldermore. Metro Bank, meanwhile, is expected to IPO early next year.

Now Virgin Money is making comfortable inroads into the mortgage market, today's results suggested it was planning to turn its sights to small businesses. It said it had hired George Ashmore, former head of asset finance at small business-focused Aldermore, to spearhead its small business banking arm.

What Virgin Money said

Gadhia added:

The third quarter has seen a continuation of delivery on our promises on all key metrics. In the same way, we have continued to build out our capabilities and we have made further and considerable progress towards our long-term strategic objectives. We remain focused on delivering growth, quality and returns for the benefit of all of our stakeholders.

In short

Virgin Money's third quarter results are more proof challenger banks could pose a real threat to their larger rivals.

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