LONDON - Virgin Money (LON:VM) UK has initiated a new £150 million share repurchase scheme, alongside reporting a decline in its pretax profit for the fiscal year ending September 30. The bank's pretax profit fell to £345 million after adjustments, down from £595 million in the prior year.
The financial institution also revealed that credit impairments have risen to £309 million, reflecting a cautious economic outlook while maintaining low default levels, suggesting that creditworthiness remains strong. This comes on top of a previous £50 million buyback carried out earlier this year.
Operating expenses increased by six percent to reach £971 million, partly due to efforts aimed at resolving service challenges and heightened investment activities. Despite the dip in profits and rise in impairments and expenses, Virgin Money experienced an eight percent increase in net interest income, adding an additional £124 million. This boost was driven by favorable high interest rates and structural hedging benefits, which helped lift the net interest margin slightly by 0.06 percent to 1.91 percent.
Looking forward, Virgin Money is targeting a net interest margin of between 190-195 basis points for the next year. The bank is poised to focus on strategic income growth through high-margin lending and enhancing relationship customer accounts, even as it navigates the competitive pressures of the mortgage market and changing consumer spending behaviors.
InvestingPro Insights
Virgin Money UK's latest financial maneuvers, including the £150 million share repurchase scheme, are a testament to the management's confidence in the company's value and future profitability. Reflecting on the real-time data from InvestingPro, the bank's aggressive share buyback initiative aligns with the InvestingPro Tip that management has been actively repurchasing shares, signaling a bullish stance on the stock's valuation.
The bank's ability to maintain dividend payments, despite the reported decline in pretax profit, is corroborated by another InvestingPro Tip highlighting the expectation of strong earnings to support continued dividend distributions. With a generous dividend yield of 6.88%, Virgin Money UK stands out as a significant dividend payer, which could attract income-focused investors.
InvestingPro Data further reveals the company's attractive valuation metrics, with an adjusted P/E ratio for the last twelve months as of Q2 2023 sitting at a low 3.66, and a Price / Book multiple at just 0.38, suggesting that the stock may be undervalued compared to its book value. However, it's important to note that revenue has been contracting, with a decline of 9.8% in the last twelve months as of Q2 2023, which could be a point of concern for growth-oriented investors.
For readers interested in a deeper analysis, InvestingPro offers a range of additional tips—10 in total for Virgin Money UK—that can provide further insights into the company's financial health and stock potential. With the current special Black Friday sale, subscribers can access these valuable tips at a discount of up to 55%, making it an opportune time to gain comprehensive investment insights.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.