No respite in mortgage market; downgrading Virgin Money UK to ‘Underperform’

  • Sectors : Banks
  • Companies : Virgin Money UK | Lloyds Banking Group | RBS


Ratings and price correct at time of issue

Company Rating Date Previous Rating Date Closing Price
Lloyds Banking Group OUTPERFORM 28/05/19 Neutral 14/02/18 59.3p
RBS NEUTRAL 11/02/19 N/A N/A 223p
Virgin Money UK UNDERPERFORM 15/11/19 Neutral 28/05/19 143p


While spreads on new mortgages stabilised during Q3, we do not think this will persist and therefore expect net interest margins (NIMs) to remain under pressure, with few lenders possessing the balance sheet characteristics to grow without a detrimental impact on overall returns. We downgrade Virgin Money UK (VMUK) to ‘Underperform’ (price target: 127p) as we expect it will need to sacrifice lending growth to protect its weaker post payment protection insurance (PPI) capital position. We maintain our preference for Lloyds Banking Group (LLOY) (‘Outperform’, price target: 64p) over RBS (‘Neutral’, price target: 225p).

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Nov 15 2019, 07:00 GMT