Berenberg raises target price on Virgin Money
Virgin Money Holdings (UK)
Analysts at Berenberg raised their target price on lender Virgin Money UK from 170.0p to 195.0p on Monday but cautioned that "relative challenges" may worsen.
Berenberg said Virgin Money's recent growth has exceeded both consensus and its own expectations but warned that the strength is likely to be only temporary, due to refinancing activity, but has supported better near-term revenues.
"We, nevertheless, remain concerned that the bank's deposit mix will constrain its net interest margin as interest rates rise (which is well understood) and exacerbate volume headwinds (which is less well appreciated)," said the analysts.
The German bank stated that while Virgin's shares were "cheap", trading on 6.2x its full-year 2024 earnings per share estimates, it believes that these headwinds will lead to lower growth and returns than UK peers.
"As a result, we believe that Virgin Money may struggle to re-rate materially," said Berenberg, which also reiterated its 'hold' rating on the stock.
Reporting by Iain Gilbert at Sharecast.com