Credit cards boost Virgin Money

British challenger bank Virgin Money Holdings saw a 26% rise in first-half underlying pretax profit, helped by growth in the bank’s core mortgages, savings and credit card businesses.

Underlying pretax profit rose to £128.6m (€143.7m) for the six months ended June compared with £101.8m a year earlier.

The lender, which reported a 7% rise in mortgage balances, said Britain’s housing market is expected to remain “resilient”, but warned in the near term there may be some “areas of weakness to be navigated”.

“Mortgage spreads are expected to continue to face some pressure,” the lender said.

Britain’s housing market has come under pressure in recent months. Asking prices for houses and apartments in England and Wales stabilised between June and July, after a drop the previous month, but home-buyers remain cautious as wage growth falls behind inflation.

“Although the UK economy has remained resilient during the first half of the year, including stable GDP and house prices and record employment, post referendum economic uncertainty remains,” Virgin Money said. Both home-buyers and shoppers are under pressure from a squeeze on real take-home pay as consumer price inflation rises at its fastest pace in nearly four years while wage growth slows.

The Bank of England ordered banks to apply credit rules prudently and prove by September they are not being too complacent about risks to their balance sheets.

Virgin Money said it does not lend in the unsecured personal loan or motor finance markets.

The lender’s credit cards business, which contributed almost 28% of total income in the first half, saw balances rise to £2.8bn.

The bank said it was still planning to hit its target of £3bn in credit card balances by the end of this year, saying it could do so with no deterioration of asset quality.

The lender said in a separate statement that its chairman Glen Moreno is to retire in 2018.

Meanwhile, British subprime lender Provident Financial reported a 22.6% drop in first-half pretax profit, hit by continued problems with its drive to switch from using self-employed agents to directly employed ones.

The company, which provides credit to people who do not meet the loan criteria of mainstream banks, operates Vanquis Bank and consumer credit brands including Satsuma, Provident and glo and Moneybarn, said pretax profit fell to £115.3m in the six months to June 30.

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