Clydesdale Bank owner tipped to reveal mortgage boost
Virgin Money UK – owner of the Clydesdale and Yorkshire banks – is this week expected to reveal it has benefited from bumper mortgage lending following the easing of the first lockdown.
Analysts believe the Glasgow-headquartered group could beat City forecasts when it reports full-year figures on the back of robust lending and better-than-expected bad debt performance.
Brokers at Barclays believe the group is in a strong position to benefit from increased mortgage market activities. It argues that consensus financial forecasts for the group, which last year merged with Clydesdale owner CYBG, don’t fully reflect the impact of a buoyant mortgage market.
"We think Virgin Money is well-positioned to take advantage of improvements in the UK mortgage market, alongside ongoing cost savings as synergies are recognised post-merger," it said in a research note where it upgraded shares to an “overweight” recommendation.
Although it expects the surge seen in mortgage lending to ease off, it believes Virgin Money is “best positioned" to benefit.
"We think that home mover mortgage volumes are likely to normalise from the peak seen in the summer, as post-lockdown demand eases and the Stamp Duty relief comes to an end,” it argued.
“However, remortgaging applications have failed to recover to pre-Covid levels, and we think a delayed improvement in remortgaging will support volumes going forward," it added.
Analysts at Shore are also bullish on prospects for the group, which has enjoyed a strong share price rally recently as sentiment has improved after a strong set of Q3 results from the large mainstream banks followed by positive news on potential Coronavirus vaccines.
It believes current consensus expectations for the group may be too low as they include a significant increase in impairments in the final quarter that it said would be at odds with what has been reported elsewhere in the industry.
“While the new national lockdown does create some added uncertainty, this has to some extent been compensated for by the extension to government support schemes which is likely to push the peak in unemployment back into next year,” Shore said.
The group will also update on its plans to win a significant number of new current accounts from high-street rivals.
It recently unveiled a rewards scheme that will give Virgin Money current account customers access to hefty discounts on the broadband, gym memberships and holidays sold by its sister brands in the Virgin Group.
Virgin wants to raise its market share from 2.5 per cent to 3.5 per cent of the UK's 77 million current accounts.
Last week Virgin Money UK named Clifford Abrahams as its new chief financial officer.
He will join the group in March from ABN Amro Bank where he has held the same role since 2017.
Abrahams had previously held senior finance roles at insurers Delta Lloyd and Aviva, having started his career with Morgan Stanley. He will take over from Enda Johnson, who is currently carrying out the role on an interim basis following the departure of Ian Smith who recently joined Nordea. Shore said Abrahams’ appointment “removes a key senior management uncertainty for the group”.
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