By Yadarisa Shabong
(Reuters) - British bank Virgin Money (LON:VMUK) laid out plans on Wednesday for 175 million pound ($223 million) in share buybacks in its 2023 financial year, after reporting margins had broadly held up despite pressure in its mortgage business.
Shares in the lender, which serves around six million customers, were up 3% by 0956 GMT.
In a third-quarter trading update, the bank said it would launch a 50 million pound buyback immediately, with plans for the rest to follow when it announces full-year results in November.
Third-quarter net interest margin (NIM), a key measure of profitability, had dipped just one basis point from the prior three months to 193 bps, it said.
It maintained its full-year outlook, but set aside an additional 55 million pounds in the quarter to cover potentially soured loans, particularly in its credit card business.
The lender has set its loan loss provisions expecting for conditions to get "a bit worse", finance chief Clifford Abrahams told Reuters.
Its mortgage loan book dipped 0.4% on the prior year in what it described as a "subdued" market, after a long run of interest rate hikes by the Bank of England.
"Two-year mortgages are more popular than five-year than they've been for a while, as customers feel that interest rates have gone up, (and) want to position themselves for possible reductions in the future," Abrahams said.
Virgin Money said the benefit of higher benchmark rates had been offset by competitive pressure in mortgages and continued deposit migration.
"The group expects housing activity to remain muted in the near term, given the implications of higher rates," it said.
"(We) will continue to focus on supporting existing customers and managing mortgage profitability considering the current challenging trading conditions."
The company plans to cut its branch network by 30%, bringing the number of branches down to 91 as footfall dwindles and online banking becomes more popular.
($1 = 0.7833 pounds)