Virgin Money, owner of the former Clydesdale Bank, saw its shares surge more than 10 per cent in early trading today after upgrading its earnings expectations for this year.

The bank, which merged with Glasgow-based Clydesdale in 2018, became the latest high street lender to underline the benefits from rising interest rates applied by the Bank of England in a bid to tame surging inflation.

And it took steps to ease the inflation crisis on its employees by announcing a 10% pay-rise for the majority of its 7,500 staff, following a one-off £1,000 cost-of-living payment in August.

Virgin this morning reported a 43% increase in profits to £595 million in the 12 months to September 30, which came as total underlying operating income climbed by 12% to £1.75 billion. The bank said net interest margin – broadly the difference between how much interest it earns on loans and the interest it pays on deposits – increased to 1.85% from 1.62%, with the lender forecasting further expansion in its NIM this year, based on current rate expectations.

The bank said credit quality remained “robust” despite the worsening backdrop for the economy.

Chief executive David Duffy said: “2022 has been a milestone year for Virgin Money. We have good momentum while delivering a strong performance and improved returns for our shareholders. We’ve changed the game in purpose-led flexible working to create an engaged, high-performing organisation that’s cost[1]efficient and agile, which will underpin targeted growth through further digital innovation.

“While we have solid credit quality across our lending, we are aware that some customers will have to make difficult decisions in this environment, and we are proactively offering them help and support."

The bank declared a final dividend of 7.5p per share and announced a £50m share buyback, adding to the £75m buyback that it started in June. It took total shareholder distributions to £267m for the year.