Virgin Money UK has released a December quarter trading update (sans earnings figures) and reaffirmed the FY21 guidance and targets set out at the FY20 results.
The first quarter credit impairment charge is only GBP18m (compared with GBP269m in the second half 2020 and GBP232m in the first half 2020). On a run-rate basis, this charge is significantly lower than Morgan’s expectation for FY21.
The analyst believes this outcome, while positive for the company, is of greater import (and positive) for the major Australian banks that have stronger provision coverage levels for their respective mortgage books.
The Reduce rating is unchanged and the target is increased to $2.36 from $2.
Sector: Banks.
Target price is $2.36.Current Price is $2.82. Difference: ($0.46) – (brackets indicate current price is over target). If VUK meets the Morgans target it will return approximately -19% (excluding dividends, fees and charges – negative figures indicate an expected loss).
