Virgin Money UK : 2021 Interim Financial Results Fixed Income Presentation

Interim FinancialResults2021 FixedIncome Presentation

3 Financial Results

1. Capital, Funding & Liquidity

1. Q&A

2

Financial Results

RICHARD SMITH

Head of Investor Relations

3

Strong financial performance…

Balance	• NIM of 1.56% for H1 (1.60% for Q2), improved guidance for FY21
sheet	• Relationship deposits +12% HoH; cost of deposits down 20 bps
mix	• Stable lending balances reflecting careful management through Covid-19
	• H1 21 costs of £460m; expect further progress in H2
Efficiency	• Underlying cost:income ratio of 62%
	• Expect FY21 costs of <£890m; phasing impacted by ongoing restrictions
	• Asset quality remains resilient
Asset	• H1 21 impairment provision charge of £38m; 11bps cost of risk
quality
	• Maintaining strong provision coverage; total credit provisions of £721m
Balance	• Capital remains robust: CET1 ratio improved to 14.4%(1)
sheet	• Significant CET1 management buffer of c.£1.3bn above regulatory minimum
strength
	(1) IFRS 9 transitional basis; 13.9% CET1 ratio excluding the benefit from the change in treatment of software intangible assets in the period

Underlying

ROTE

10.1%

Underlying profit

before tax

£245m

Statutory profit

before tax

£72m

Robust CET1

Ratio(1)

14.4%

4

…supported by an improving backdrop

GDP: stronger than anticipated rebound

GDP: indexed to Q4 19

	110
	100
Gathering	90
pace of
recovery	80
	70
	Q4	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4
	19	20	20	20	20	21	21	21	21	22	22	22	22

Unemployment: lower than initially feared

ILO unemployment rate

7%
6%
												Continued
5%												government
4%												support
3%
Q4	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4
19	20	20	20	20	21	21	21	21	22	22	22	22

Source: Oxford Economics Base Case, March 2021(1)

Source: Oxford Economics Base Case, March 2021(1)

Card activity: improving consumer spending

	60%	VMUK customers card spend:
	40%	monthly, % change vs. same month a year earlier
						Debit card spend
	20%						Credit card spend
Lockdown	0%
easing	(20)%
	(40)%
	(60)%
		Jan 20	Mar 20	May 20	Jul 20	Sep 20	Nov 20	Jan 21	Mar 21

(1) Note: IFRS9 MES are based on January Oxford Economics scenarios

Rates: significant yield curve steepening since December

0.8%	GBP SONIA swap curve; March vs December
0.6%
0.4%										Improving
										UK rate
0.2%										environment
0.0%
O/N	1Y	2Y	3Y	4Y	5Y	6Y	7Y	8Y	9Y	10Y
				Q1 21			Q2 21	Source: Bloomberg
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