UPDATE 1 — Newcastle and Edinburgh-based challenger bank Virgin Money insisted it had maintained a “strong focus on asset quality” as its credit card balances grew about 8% to £2.7 billion in the first quarter.

In a first quarter trading update, Virgin Money said it had seen “stable customer behaviour and arrears levels” in its credit card business.

The bank said it prioritised asset quality over balance growth — but it was still targeting £3 billion of “prime” credit card balances by the end of 2017.

It said it had gross mortgage lending of £2 billion in the quarter, a market share of 3.4% — and net mortgage lending of £0.9 billion, a market share of 12.3%.

Deposit balances rose 3% to £28.98 billion during the quarter. Mortgage balances rose 3% to £30.68 billion.

Virgin Money CEO Jayne-Anne Gadhia said: “Our mortgages and savings business continue to flourish with gross mortgage lending of £2.0 billion and a £0.9 billion increase in deposits during the quarter. 

“Whilst maintaining our strong focus on asset quality, credit card balances grew by £0.2 billion to £2.7 billion. 

“Our approach, including the strict and consistent application of underwriting standards, continues to support a low and stable cost of risk.”

In its 2017 outlook, Virgin Money said: “We watch the increase in consumer indebtedness closely and continue to lend responsibly to our prime books of mortgage and credit card customers who are showing no signs of strain in the current environment …

“Mortgage competition remains strong in certain segments and our nimble approach to distribution and pricing enables us to manage product price and volume in accordance with expectations …

“Cards competition has increased and we have not followed competitors into top of the table pricing. 

“We prioritise asset quality over balance growth, despite which we remain confident of achieving £3 billion of prime credit card balances by the end of 2017.”