Brexit has yet to hit challenger bank Virgin Money, after it said credit card and mortgage lending were both up in the first quarter.
But anyone hoping for a hint about its intentions towards the Co-operative Bank was disappointed.
The lender said it had made "strong progress" in the three months to the end of March, with mortgage lending rising £2bn, giving it a 12.3 per cent share of the UK's mortgage market. Credit card balances rose eight per cent to £2.7bn, while deposit balances rose three per cent to £29bn. In other words: its first-quarter performance was well in line with expectations.
However, shares were down 0.6 per cent in early trading, at 321.1p.
Why it's interesting
After last year's EU referendum the UK's challenger banks, including Virgin Money, wobbled, with shares dipping. For the large part, though, they are recovering well: in February Virgin assured investors Brexit was yet to have any effect.
Today the lender warned strong competition in mortgages and credit cards could cause problems. "Cards competition has increased and we have not followed competitors into top of the table pricing," it said.
"We prioritise asset quality over balance growth, despite which we remain confident of achieving £3bn of prime credit card balances by the end of 2017."
One topic conspicuous by its absence was the Co-operative Bank: namely, whether Virgin is intending to bid for it. The bank was one of two obvious bidders for the troubled lender, which was put up for sale by the Co-op in February: at the beginning of this month it was even suggested Virgin was gearing up to table a bid. But so far, the lender has kept schtum.
- Keep an ear out for tomorrow's City A.M.Unregulated podcast, in which Virgin Money chief executive Jayne-Anne Gadhia talks that Co-op bid, mental health and working with Richard Branson
What Virgin Money said
Chief executive Jayne-Anne Gadhia said:
Our customer-focused strategy of growth, quality and returns continues to deliver excellent results and demonstrates the benefits of our low-risk business model, strong balance sheet and ongoing focus on operational excellence.
Our approach, including the strict and consistent application of underwriting standards, continues to support a low and stable cost of risk. We remain committed to delivering growth, quality and returns and to ensuring our strategy delivers long-term success for the benefit of all of our stakeholders.
What analysts said
Gary Greenwood, of Shore Capital Markets, added:
Virgin Money’s shares have drifted back from their recent high of 348p that was reached in February and now offer 22 per cent upside to our fair value estimate of 395p, which we expect to leave unchanged.
Despite strong competition in mortgages and credit cards, Virgin Money continues to demonstrate its ability to take market share while maintaining price discipline and credit quality, reflecting its strong focus on customer service.
As such, we remain bullish on the near-term prospects for the group and, given an undemanding valuation, reiterate our positive stance.