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Banking group Virgin Money UK upgraded its annual margin guidance after it boosted mortgage lending volumes in the third quarter.
The company's net interest margin, a key measure of profitability, for the three months through June improved to 168 basis points, up from 160 basis points in the second quarter.
Virgin Money UK said margins had benefitted from a lower cost of funds driven by improvements in deposit mix and repricing, partially offset by a more competitive lending backdrop.
It forecast its net interest margin for the full year to be 'modestly ahead' of 160 basis points, stabilising into the fourth quarter.
Mortgage volumes in the third quarter grew 0.7% compared to the second to £58.7 billion. Customer lending rose 0.4% but business lending fell 2.5%.
Customer deposit volumes fell 0.8% to £68.0 million.
The company said 'robust' credit quality was maintained across key portfolios, with no significant specific provisions in the third quarter.
Balance sheet credit provisions amounted to £678 million, compared to £721 million in the first half, while the impairment release fell to £19 million.
'If the current strengthening in the economic backdrop persists, the group believes there may be an opportunity for a further reduction in credit provision levels alongside the 2021 financial year results,' the company said.