Small fried

20 March 2018 By Christopher Thompson Follow @CGAThompson

Shares in the 1.1 bln pound Virgin Money trade below book value despite a 14 pct return on tangible equity. Market behemoth Lloyds, meanwhile, is worth more than its net assets. Investors seem to be betting that a double whammy of funding costs and bad debts hits minnows harder.

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UK bank Virgin Money reported a 28 percent rise in underlying full-year pre-tax profit on Feb. 27 as it sought to lure customers away from Britain’s Big Five lenders - Lloyds, Royal Bank of Scotland, Barclays, HSBC and Santander UK.

The British challenger bank said that underlying pre-tax profit rose to 273 million pounds for the year ended Dec. 31, beating analysts’ expectations of 259 million pounds.

Virgin’s share of the British mortgage market is 3.3 percent. Its gross mortgage lending rose to 8.4 billion pounds in the year and the bank expects to grow mortgage balances at a single digit percentage rate during 2018, helped in part by Britain’s new "open banking" reforms.

On March 20 Virgin and Aberdeen Standard Investments announced a joint venture to provide asset management services to the lender’s customers. Insurers and asset managers are seeking distribution deals with banks to extend their customer bases.

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