Virgin Money (VUK) shares continue to rocket higher


Virgin Money (VUK) $2.83 as at 28/11/2019


The old Clydesdale bank, and prior to that the UK arm of NAB, has seen its shares rocket higher today following their full year result posted to the UK market last night. Shares are up over 20% today, and now up over 70% from the panic lows set last month on hard BREXIT fears and earnings problems tore the stock up – although shares are now almost exactly where they started the year, and ~45% off the 2018 high.

The result itself was a long way from the FY18 result but curbed a multitude of fears the market had from the UK based deposit taker. Underlying profit before tax came in at £539M, around about in line with consensus but 7% below last year. The statutory after tax figure fell into a significant loss of -£268M thanks to climbing remediation costs from claims against the bank. Net interest margin continued to come under pressure, coming in at  166bps for the full year, but as low as 160bps in the last quarter. Funding costs are rising and the home loan book earnt 8bps less.

The result reads poorly, but when shares are priced at around half of NTA, a little goes a long way. Clearly there is trouble within the business, but the market was positioned particularly negative heading into the result. The Virgin Money integration is coming along well, and will complement the business long term if it can be executed properly. A big part of this will be costs, with plenty of fat on the bone here for VUK to carve into.

Virgin Money (VUK) Chart

Market Matters Take/Outlook

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