Negative rates haunt Virgin Money, bank investors

Worsening outlook

The BoE’s August Monetary Report notes if rates turn negative then deposit-taking institutions probably can’t take deposit rates below zero in response as customers would hoard physical cash.

As a result, the profit margins the banks make on the spreads between lending and deposit rates could narrow the most yet in the current rate-cutting cycle.

Virgin Money’s net interest margin in the UK fell 16 basis points over the June quarter to just 1.47 per cent.

Broker Bell Potter cut its valuation on the bank 10 per cent to $1.80, suggesting if UK cash rates go lower then it’ll struggle to reprice its savings rates offered to depositors.

Banks most reliant on retail deposits for funding are the most exposed to negative rates, according to the BoE. Bell Potter reported 79 per cent of Virgin Money’s funding came from retail deposits in the second half of financial 2020.

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Virgin Australia Bondholders Withdraw Plans for Proposal to Rival Bain Capital Deal | Investing News

SYDNEY (Reuters) – Virgin Australia Holdings Ltd

bondholders have withdrawn plans for a proposed recapitalisation of the airline that was meant to rival one from U.S. private equity firm Bain Capital, a spokesman for the bondholders said on Friday.

Singapore’s Broad Peak and Hong Kong’s Tor Investment Management, which had proposed the rival deed of company arrangement (DOCA) to recapitalise the airline, hold around A$300 million ($216 million) of Virgin’s A$2 billion of unsecured bonds, part of nearly A$7 billion owed to creditors.

A court ruling this week makes it impossible to complete due diligence and present a substantially unconditional DOCA proposal to rival Bain’s at a creditors’ meeting on Sept. 4, the spokesman for the bondholders said.

Virgin Australia is in voluntary administration, the closest Australian equivalent to Chapter 11 bankruptcy provisions used to restructure companies in the United States.

Administrator Deloitte plans to issue a report to creditors

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Virgin Money upbeat, Bank of England to review dividend policy, and Greggs sales recover

Here are the top business, market, and economic stories you should be watching today in the UK, Europe, and abroad:

Virgin Money upbeat

Virgin Money (VMUK.L) has struck an upbeat tone on third quarter trading.

The challenger bank said customer deposits rose by 4.8% in the third quarter to £67.7bn ($87bn), as Brits stuck as home during lockdown spent less. The rise equates to around £600 extra in every Virgin Money customer’s current account or savings account.

Mortgage lending fell by 1% as the housing market paused by business lending surged by 5.7% to £8.8bn in the three months to 30 June.

“Our Q3 financial results reflect lower demand from consumers due to the pandemic, but strong demand from businesses for government-supported schemes, with the Group further increasing its provisions to reflect the uncertain economic outlook while maintaining a focus on margin, cost and capital management,” said chief executive David

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