(Recasts top, adds CEO, analyst comments)
By Esha Vaish
April 25 Britain's Virgin Money stuck by
plans to grow its credit card balances to 3 billion pounds
($3.84 billion) this year, saying tighter lending criteria and
an affluent customer base would help it avoid concerns about
rising consumer debt.
The credit card market in Britain, where 3.3 million people
are in persistent debt, has come under scrutiny as the Bank of
England has warned about a surge in risky lending and the
country's financial regulator had launched a review.
Virgin Money did not expect to be materially impacted by the
review, Chief Executive Jayne-Anne Gadhia told Reuters on
Tuesday, as the bank had tightened lending criteria for the
credit card business in the last 12-18 months to reduce the
proportion of the riskier categories of credit cards it issued.
The bank's credit card balances rose 8 percent to 2.65
billion pounds in the quarter ended March 31 from the end of
2016, helped by lower unemployment.
Gadhia said an affluent client base, made up of individuals
with average monthly excess income of about 750 pounds after
repayment of debt, gave her confidence that customers would
continue to pay debts even if interest rates rose.
"With elevated concerns over unsecured lending, Virgin Money
have delivered a reassuring message that credit had not turned
yet in first quarter," Jefferies analysts wrote, sticking by
their "buy" rating and target price of 430 pence.
The company also reaffirmed the rest of its 2017 targets,
which include maintaining a 3.0-3.5 percent market share of
gross mortgage lending.
The Newcastle-based lender said it might also revive its
plans to start lending to small and medium sized businesses, if
Royal Bank of Scotland's to set up a 750 million pound
fund for small banks is approved by the European Union.
RBS has asked to establish the fund as an alternative to
having to sell off around 300 retail branches in order to settle
antitrust requirements following its 2008 government bailout.
Virgin Money had mothballed its plans for SME lending after
the Brexit vote.
The bank has also expressed interest in Co-operative Bank
, which is up for sale, but Gadhia declined to say
whether it is in talks with the struggling lender.
"We always look at everything but we're never committed to
anything that's going to (raise) any concerns around risk...
Strategically, the product we'd like to grow in is retail
current accounts," she said.
($1 = 0.7805 pounds)
(Reporting by Esha Vaish and Tenzin Pema in Bengaluru; Editing
by Mark Potter and David Evans)