Mortgage lending boosts profits at Virgin Money

British bank Virgin Money said its first-half profit jumped 37 percent, bolstered by a surge in mortgage lending.

REUTERS Virgin Money said a competitive mortgage market put pressure on asset spreads in the first half of 2015, and it expected competition to continue to remain a headwind in the second half of the year.

“Gross mortgage lending increased by 44% to £3.6bn in the first half of the year, representing a 3.8% market share of gross lending and a 20.5% share of net lending to the end of May”.

Challenger banks such as Virgin Money and TSB Banking Group were previously exempt from the bank levy given the small size of their balance sheets, but will now have to pay an 8 percent surcharge on their profits.

Interim figures from Virgin Money, which runs 75 branches across the country, also showed its retail deposits rose by 3% to £22.8 billion.

The Newcastle-based lender, which listed last year and is backed by billionaire Richard Branson, said its credit card business is now fully operational on Virgin Money’s own platform and new business has been strong since the successful migration.

A total of 675,000 credit card accounts successfully migrated to Virgin Money’s own platform in March 2015 and as of June 30 2015 credit card balances stood at £1.1bn.

The roll-out of its Essential current account has now taken place across all its branches, most of which were inherited following its Northern Rock takeover for £747 million in 2011.

PLC (VM.LN) Tuesday posted half year earnings growth mainly due to strong growth in its mortgage business and effective management of costs within the business, and said it expects full-year net interest margin slightly ahead of guidance.

“We continued to increase our share of the mortgage market while protecting the quality of our book”, Virgin Money Chief Executive Officer Jayne-Anne Gadhia said in a statement.

The pair are among several new entrants to emerge since the financial crisis as the Government and customers alike sought alternatives to the Big Five lenders – Lloyds, HSBC, Royal Bank of Scotland, Barclays and Santander UK.