Credit card

Virgin Money sees rebound in credit cards and travel spending

People walk past a Virgin Money store in central London, Britain July 27, 2021. REUTERS/Henry Nicholls

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  • Credit card spending returns to pre-pandemic levels
  • Consumer confidence returns, people spend more
  • Raises net interest margin outlook for 2022

Feb 1 (Reuters) – British bank Virgin Money (VMUK.L) said on Tuesday credit card spending had returned to pre-pandemic levels on pent-up demand, while rising interest rates helped raise its margin forecast for the year.

Spending on credit cards had taken a hit since the start of the pandemic as people poured money into savings and investments, while canceling travel plans and spending less in lockdowns.

But the easing of restrictions has boosted consumer and business confidence.

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Finance chief Clifford Abrahams told Reuters the bank is seeing travel spending on its credit cards return to pre-COVID-19 levels.

“Clients who feel good about their jobs, about future pay raises, some of them have money on deposit, so they’re willing to spend,” Abrahams said.

Virgin Money expects its net interest margin (NIM) – a key measure of a bank’s underlying profitability – to be around 175 basis points by September 2022.

The outlook comes as the Bank of England raised interest rates in December, with further increases expected to follow to combat rising inflation.

Analysts said Virgin Money’s first-quarter trade update for the three months ending December set an overall positive tone for the industry ahead of rivals’ annual earnings later this month.

“We see the recovery in unsecured balances as a useful cross-read for Barclays and Lloyds within UK banks,” analysts at JPMorgan Cazenove said in a note.

Virgin Money shares rose 3% in early trading before losing momentum and were broadly flat at 1200 GMT.

The British bank, which has already launched installment loans on its credit cards, plans to offer a subscription-based digital credit product in the coming quarters, mainly for young people looking to improve their credit rating.

“Young people want to build their credit history while looking to stay in control,” Abrahams said.

The bank, which said in November it was looking to digitize its services at a faster pace, also said the number of new accounts opened exceeded 132,000 in the quarter – the highest since the pandemic began. .

Virgin Money, formerly known as CYBG, saw a decline in mortgage and business lending due to a drop in government-backed loans in the sector and weaker market demand.

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Reporting by Sinchita Mitra and Yadarisa Shabong in Bengaluru; edited by Milla Nissi and Jane Merriman

Our standards: The Thomson Reuters Trust Principles.