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Virgin Money U.K. shares defy a widened annual loss

ASX 200
ASX:VUK      MCAP $2.234B
29 November 2019 16:06 (AEST)

Despite an $80 million loss in underlying annual profits, investors have flocked to buy shares in Virgin Money U.K. today.

The ASX200-lister, called CYBG PLC until two weeks ago, is up a whopping 23 per cent in early afternoon trade and has tacked 60 cents onto its share price so far.

The ex-NAB spinoff bank’s underlying profits for the 2019 financial year came in at just over $1 billion (£539 million) compared to the $1.1 billion last year (£581 million).

On top of this, a widened statutory loss after tax — $370 million (£194 million) in 2019 compared to 2018’s $277 (£145 million) — meant the big bank had to slash its end-of-year dividend payment completely.

The big bank blamed a $734 million (£385 million) hit from increased Payment Protection Insurance payments, combined with some outstanding costs in the merger from CYBG to Virgin Money U.K., for the loss.

Yet, despite these seemingly-poor figures, Virgin Money outperformed market expectations.

With some solid growth to the bank’s return on tangible equity (RoTE), personal and business lending, and assets, it seems investors were happy to overlook profits and losses in hopes of strong future returns.

Looking ahead, Virgin Money said the political and economic outlook, particularly regarding the upcoming U.K. General Election and Brexit impacts — remains “highly uncertain”.

Nevertheless, the bank predicts a 12 per cent increase in statutory RoTE by the 2022 financial year, with underlying costs cut by $1.7 billion (£900 million) by in 2020.

Virgin Money U.K. shares are worth $3.31 on the Australian Stock Exchange in mid-afternoon trade. The bank’s market cap is valued at $1.43 billion.

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