Virgin Money welcomes strong start to 2017 but remains vigilant over consumer lending

Virgin Money, which employs 200 in at its Edinburgh hub, has revealed that its credit card balances jumped 8 per cent in the first quarter.

The Challenger bank, which operates north of the border from offices in the capital’s St Andrew Square, responded to the news by saying it intends to keep a close eye on rising consumer debt levels.

The lender saw credit card debt hit £2.65 billion in the first three months of the year, while at the same time seeing “stable” customer behaviour and arrears levels in spite of the jump.

Official retail sales figures published on Friday by the Office of National Statistics showed a shocking decline in High Street spending, leading to fears that inflation from the weak Brexit pound is beginning to hurt consumers.

It also comes on the back of a warning from the Bank of England’s financial policy committee earlier this month that the recent surge in consumer borrowing could pose a risk to the UK financial system, leaving banks exposed if their lending rules are too loose and people cannot make their repayments.

Responding to the prevailing climate of uncertainty, Virgin Money said in its latest trading statement that it was taking a cautious approach to lending and while credit card competition had increased, it was not following rivals into “top-of-the-table pricing”.

It also explained that it continues to “lend responsibly to our prime books of mortgage and credit card customers who are showing no signs of strain in the current environment. 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.”

The financial services firm also reported that net mortgage lending, which accounts for redemptions, dropped by about 18 per cent to £900 million from the equivalent period last year.

Jayne-Anne Gadhia, Chief Executive Officer said: “I am delighted with the ongoing momentum and performance of the business so far in 2017. 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 mortgages and savings business continue to flourish with gross mortgage lending of £2.0 billion and a £0.9 billion increase in deposits during the quarter. Whilst maintaining our strong focus on asset quality, credit card balances grew by £0.2 billion to £2.7 billion. Our approach, including the strict and consistent application of underwriting standards, continues to support a low and stable cost of risk.

“Our focus on customer service has led to new highs in customer satisfaction with our overall Net Promoter Score improving to +39, making us one of the best-rated retail banks in the UK. 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.”