Virgin Money boss Jayne-Anne Gadhia defended her “safe, low-risk” bank today as its share price plummeted nine per cent on its half-year results.
The challenger bank today reported a 26 per cent growth in underlying pre-tax profit in the six months to 30 June. But John Cronin, a banking analyst at Goodbody, noted that net income came in 11 per cent below expectations and that the lender's capital was also “weaker than anticipated”. The bank also issued a warning on “areas of weakness” in the UK housing market.
Gadhia told City A.M. that Virgin Money is not currently getting the credit it deserves from the market, and questioned the outlook for competitors operating in a “more racy environment”.
The company also announced after market close that she had bought more than 35,000 new shares, worth close to £100,000.
“When we underwrite customers for mortgages or credit cards we assume that credit conditions get worse than they are today. And that means we hold some more capital,” she said.
“Analysts today have said: ‘Have Virgin Money got enough capital to grow?’ The fact of the matter is our capital is less than the market expected because we’ve grown well so far, we hold more capital against good quality assets than our competitors.
“We think that’s a very sensible thing to do... we think that’s what the Bank of England are asking all banks to do, to be honest. And so I’d much rather be a safe, low-risk bank producing the returns we are than one that’s operating in a more racy environment.
“And if that’s not good enough for the market then I probably shouldn’t comment further.”
She added: “We are very, very confident about the outlook for our business. And to be honest, we’ve delivered time and time again, quarter after quarter. The market continues to say: How long can this go on with the economy as it is? And we keep on delivering. And at some point of course we’ll get the credit for that.”