Monday 16 December 2019 9:53 am | Updated: Monday 16 December 2019 5:43 pm

Virgin Money share price falls after Barclays downgrade

Stocks in Virgin Money are down by more than three per cent this morning after Barclays downgraded its rating.

Shares in Virgin Money are down by more than five per cent today after Barclays downgraded its rating.

Barclays analysts shifted Virgin Money’s stock from equal weight to underweight, signifying a pessimistic outlook, today.

The downgrade was made due to weak earnings, high growth in the amount of unsecured personal loans on its books and last month’s cancellation of 2020 dividends.

Barclays also said that the company’s new initiatives to attract “cheaper new-to-bank” deposits – such as its newly launched personal current account – are not expected to have a big impact in the short-term.

Virgin Money’s share price was down 5.31 per cent to 205.10 at the end of today’s trading.

Barclays warned that it expects weaker 2020 income from Virgin Money – formerly known as CYBG until its merger earlier this year – and another year of almost zero dividends.

“With capital tight, and capital generation muted, we expect Virgin Money to prioritise low-single-digit loan growth and again announce a near-zero dividend with FY20 results,” Barclays said.

“Virgin Money would then lack the strong capital-returns underpin of other UK banks

Virgin Money suspended next year’s dividend after it reported a £194m loss in November.

The company attributed the result to £385m of payment protection insurance (PPI) charges and the cost of its £1.7bn merger with Clydesdale and Yorkshire Bank Group.

At the time, Alasdair Ronald of Brewin Dolphin said: “The bank has taken a significant hit from additional PPI provisions and the cost of the merger, while pressure on UK domestic earners continues to take its toll.

“There are undoubtedly further challenges ahead, with increasing competition from other challenger banks potentially eroding new business margins.”

Virgin Money chief executive David Duffy said the company had “delivered a good operating performance” in a challenging environment.

“Our customer divisions have performed well – we have delivered a further £2bn in net lending to support UK SMEs and consumers, attracted £3bn in customer deposits, and made marked improvements to our customer experience,” he said.