The bank said pre-tax profits jumped to £315 million in the six months to the end of March compared with £72m in the same period a year ago.
However, this was down on the profits for the previous six months, to the end of September, which sat at £345m as the group put more money aside for potential provisions in the latest period.
In the half-year to September, Virgin released £169m previously put aside for Covid provisions, but set aside £21m in the current period.
It said it is too early to say whether the cost-of-living crisis is affecting customers but did warn that it expects the economic outlook to be more uncertain.
“Following a period of strong recovery in gross domestic product (GDP) as Covid restrictions were lifted and consumer spending levels improved, the impact of higher inflation has seen expectations for further growth start to temper,” the bank noted.
The group said it had seen particularly strong growth in credit card sign-ups. Unsecured lending grew 7 per cent during the period to £5.8 billion, while, by comparison, business lending fell 2.5 per cent to £8.3bn.
Gary Greenwood, a banking analyst at brokerage Shore Capital, said: “[First-half] results to March 31 show profits have smashed consensus expectations. The group also declared a larger than expected interim dividend.
“Despite increased macro-economic uncertainty and inflationary pressure, management remains sanguine given the well-provisioned nature of the balance sheet.”
Chief executive David Duffy admitted the macroeconomic outlook is uncertain and there are increased cost pressures on consumer, saying: “We have positive momentum in attracting new customers to Virgin Money through record credit card sales, good growth in personal current account openings and a strong uptake of our new digital fee-free business current account.”
The bank added that it is not exposed to the conflict in Ukraine but said it is monitoring the situation to ensure there are no knock-on effects to its business.
It noted: “As a domestic UK bank, the group doesn’t have direct lending exposure in Ukraine or Russia, but we are monitoring carefully for any second-order impacts arising from the conflict, particularly upon inflationary pressures in the UK.
“We have seen only limited changes in asset quality across the portfolios to date but have taken steps to factor the higher cost of living into our affordability assessments.”
The bank also added that inflationary pressures are affecting cost-cutting measures, which have included branch closures, as other costs have risen.
Costs are only 1 per cent lower due to higher spending on its digital transformation and wage rises for staff.
The size of Virgin Money’s mortgage lending fell slightly in the six-month period compared with the previous six months, by 0.5 per cent to £57.8bn, with bosses saying the bank preferred to “trade tactically” in a competitive market.