Virgin Money said profits were up as customers signed up to credit cards (Matt Alexander/PA)
(Picture: PA Archive)VIRGIN Money gave an early hint today of what rising interest rates will do to bank profits – send them sharply up.
While that will be contentious while inflation soars and a cost of living crisis hits millions, it should be good for long-suffering bank shareholders.
VM is under fire over plans to shut 31 branches this year as it focuses on a digital shake-up.
Today it said in the half-year its net interest margin (NIM) – the gap between what it pays savers and charges borrowers – rose from 1.56% to 1.83%. It is likely to go higher once the Bank of England puts rates up, starting today.
For the biggest banks such as Lloyds and Barclays, the NIM will go higher still.
Profit jumped 58% to £388 million. Chief executive David Duffy said: “"We’ve made good progress against our strategy, while delivering a significant increase in profit. We have positive momentum in attracting new customers to Virgin Money through record credit card sales, good growth in personal current account openings and a strong uptake of our new digital fee-free business current account.”
At just £21 million, so far bad debts are not undermining the bottom line. That could change as the economy worsens.
City analysts think a combination of rising profit margins and cost cutting makes the shares a buy.
Ian Gordon at Investec said: “We see the building blocks of VM’s recovery as increasingly transparent.”
The stock slipped today however, down 7p at 170p.
