In afternoon trade on Wednesday, the Virgin Money UK CDI (ASX: VUK) share price is the best performer on the S&P/ASX 200 Index (ASX: XJO) by some distance.
At the time of writing, the UK-based bank's shares are up a massive 13% to $2.79.
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Why is the Virgin Money UK share price surging higher?
Investors have been buying the bank's shares after the release of its first quarter update.
According to the release, Virgin Money UK experienced strong levels of customer deposit inflows again during the quarter. It recorded customer deposit growth of 0.9% for the period.
Management advised that this reflects lower consumer spending from tighter COVID-related restrictions, and increased levels of business liquidity driving growth in relationship deposits.
And while there were early signs of some recovery in customer spending before tighter COVID-restrictions were imposed, management notes that the combination of the most recent restrictions and customer caution resulted in continued inflows.
The increase in deposits led to its loan-to-deposit ratio falling to 106% from 107% at the end of FY 2020.
Finally, the sum of the above led to the bank reporting a stable net interest margin (NIM) of 152 basis points for the quarter.
Loan book declines
Virgin Money UK's total loan book declined by 0.3% to 72.2 billion pounds during the quarter.
This was driven by its focus on margin management, prudent underwriting, and supporting customers in a continued uncertain environment. A small reduction in mortgages and unsecured balances was partially offset by growth in business lending.
COVID support
The bank has continued to support customers through the pandemic with payment holidays where appropriate.
Pleasingly, the stock of active payment holidays continued to decline across all portfolios during the quarter.
However, as was expected, the proportion of customers requiring further support upon exiting their payment holiday has increased modestly. Though, it remains within the level assumed in its provision.
Management commentary
Virgin Money UK's Chief Executive Officer, David Duffy, was pleased with the quarter.
He said: "Virgin Money had a profitable and positive first quarter and continued to prioritise our customers and colleagues through this uncertain external environment including through payment holidays and Government lending schemes."
"We have made a good start to the year with the launch of new customer propositions, further roll-out of our rebrand programme and a return to statutory profit, while maintaining a disciplined approach."
Outlook
Looking ahead, Mr Duffy appears cautiously optimistic.
He commented: "The Group remains strongly capitalised and we have good momentum as we look out into the remainder of the year. Given the current UK-wide restrictions and ongoing uncertainty, we maintain the cautious economic outlook we outlined in November and our full year guidance remains broadly unchanged."
"Looking ahead, the vaccine roll-out and EU trade deal are encouraging for the UK's economic recovery and we remain focused on disrupting the market through a variety of innovative new products and propositions with a customer and brand experience that is the best in the market," he concluded.
