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VIRGIN MONEY UK 27 July 2021 Virgin Money UK PLC : Third Quarter 2021 Trading Update Virgin Money UK PLC ( “ VMUK ” or the “ Group ” ) confirms that trading in the three months to 30 June 2021 was in line with the Board's expectations . David Duffy , Chief Executive Officer : " Virgin Money performed well as our strategy continued to translate into improved financial delivery in a strengthening environment . We carried our momentum of relationship deposit growth into the second half , reducing our cost of funds . Our asset quality remained robust , while ca ratios imp ved further . " The positive reaction to our switching incentives and product launches reflects our focus on transforming customer experience , backed by the unique advantages of one of the world's most recognised brands . We have also advanced our ESG agenda with our first greener mortgage product and sustainability - linked business loans . " We have increased full - year NIM guidance and , while COVID continues to impact the near - term , we have a strong capital position and robust provisions . We see great opportunities from further developing our digital capabilities to deliver an improved customer experience and greater efficiencies . We are well placed to grow profitably next year as we play our role to support the UK economic recovery . " Q3 Summary - Continued financial & strategic momentum ; improving asset quality backdrop Strong relationship deposit balance growth with stable lending balances Relationship deposits increased 3.7 % to £ 29.8bn , whilst overall deposits decreased by ( 0.8 ) % to £ 68.0bn as the Group continued to manage the deposit mix and reduce funding costs Mortgages increased 0.7 % to £ 58.7bn benefitting from strong activity around SDLT deadlines Personal lending grew 2.5 % to £ 5.2bn driven by growth in credit cards as activity picked up Business lending was ( 2.4 ) % lower at £ 8.7bn as BAU activity remained subdued and Government backed loans reduced as anticipated Continued Net Interest Margin ( NIM ) momentum NIM improved in Q3 to 168bps ( Q2 : 160bps ) benefitting from a lower cost of funds driven by improvements in deposit mix and repricing as well as higher hedge contributions , partially offset by a more competitive lending backdrop Expect NIM to be modestly ahead of 160bps for FY21 , stabilising into Q4 , as wholesale funding costs and increasing competition offset the ongoing deposit repricing benefits Ongoing strategic progress ; continuing to invest our future potential and digital capability Further growth in new PCA customers to c110k this financial year , benefitting from Brighter Money Bundles campaigns ; positive response to credit card cashback offers with 175k registrations and with instalment payments launching later in the year Relaunched BCA awarded Moneyfacts 5 * rating ; innovative Wellness Tracker and Working Capital Solutions set to launch later this year , leveraging the capabilities of our fintech partners ESG progress : Launched greener mortgage product and first sustainability - linked business loans Improving economic outlook and robust asset quality Robust credit quality maintained across key portfolios with no significant specific provisions in Q3 ; balance sheet credit provisions of £ 678m ( H1 21 : £ 721m ) ; coverage of 94bps ( H1 : 100bps ) Q3 impairment release of £ 19m driven by lower modelled ECL from updated macro assumptions Quarterly cost of risk of ( 10 ) bps ( H1 charge : 11bps ) ; year - to - date cost of risk now 4bps If the current strengthening in the economic backdrop persists , the Group believes there may be an opportunity for a further reduction in credit provision levels alongside FY21 results Improved CET1 ratio with FY outlook improved CET1 ratio increased c.40bps to 14.8 % ( including c.45bps of software benefit ) ; benefited from continued strong profitability and benign RWA backdrop ; fully loaded CET1 ratio now 13.7 % Expect FY21 CET1 to be broadly stable against Q3 level , including the software benefit ; RWA inflation more likely in FY22 Solvency Stress Test ( SST ) outcome and impairment outlook remain key inputs into our approach to considering shareholder returns ; expect a further update on our capital framework post - SST