Virgin Money UK (LON:VMUK) - finally, a successful challenger bank

Summary

After some difficult years, last year’s results from FTSE 250 challenger bank Virgin Money UK (LON:VMUK) were characterised by improved profits, top-line growth and a new confidence.

Cyclical risks can’t be ignored, but the bank’s shares continue to trade at a wide discount to book value. This suggests a potential opportunity, if existing momentum can be maintained.

Bull points:

Recent results show continued growth and a strong capital positionRising interest rates are contributing to improved profitabilityTrading at c.50% discount to tangible book value; cheaper than peers, despite similar profitabilityNewly-established dividend provides attractive 4%+ forward yieldBear points:

Economic slowdown raises the risk of elevated losses from bad debtVirgin Money has not yet established a long-term track record of profitable through-cycle lendingCompany still lacks scale against the big four high street banksProfile

About the stock

Virgin Money UK operates in the Financials sector and is part of the Banking Services industry group.

The group’s shares currently trade at 192p on the LSE Main Market. Virgin Money is a member of the FTSE 250 and has 1.4bn shares in...