The bank confirmed that trading in the three months to 30 June 2021 was in line with the board's expectations and the UK economic outlook improved further in the third quarter.
In a statement, Virgin Money said: "The rollout of the vaccination programme and the easing of restrictions supported further positive revisions to expectations.
"Stronger GDP growth, lower unemployment, a robust housing market and greater consumer confidence are all positive indicators of the improving outlook for the operating environment.
"Overall, while risks remain from the increase in COVID case numbers driven by the new variants and the impact of the removal of Government support schemes later in the year, the strengthening backdrop gives scope for greater optimism about the pace of the recovery."
David Duffy, the chief executive, said: "Virgin Money performed well as our strategy continued to translate into improved financial delivery in a strengthening environment. We carried our momentum of relationship deposit growth into the second half, reducing our cost of funds. Our asset quality remained robust, while capital ratios improved further.
"The positive reaction to our switching incentives and product launches reflects our focus on transforming customer experience, backed by the unique advantages of one of the world's most-recognised brands. We have also advanced our ESG agenda with our first greener mortgage product and sustainability-linked business loans.
"We have increased full-year NIM guidance and, while COVID continues to impact the near-term, we have a strong capital position and robust provisions. We see great opportunities from further developing our digital capabilities to deliver an improved customer experience and greater efficiencies. We are well placed to grow profitably next year as we play our role to support the UK economic recovery."
Virgin Money notched up a rise in customer loans and cut the amount of money put by for bad debts in the pandemic, thanks to the UK’s economic bounceback.
The group – formerly known as CYBG – said it was releasing £19 million of cash set aside for loans that could turn sour in its third quarter.
It added that the remaining £678 million of provisions could be slashed further alongside full-year results if the rebound in the wider economy continues.
Virgin Money upped the outlook for its net interest margin – a key measure of profitability for retail banks – in a welcome boost after seeing margins squeezed by rock bottom interest rates.
The group posted a 0.7% rise in mortgage lending to £58.7 billion for the three months to June 30, helped by the homebuyer rush to beat the end of full stamp duty relief.
It said personal lending grew 2.5% to £5.2 billion, driven by credit card usage as consumer spending rose amid easing coronavirus restrictions.
This helped offset a 2.4% drop in business lending as the Government’s Covid-19 support schemes began to wind down.
It said Government-backed lending balances fell 3.2% to £1.4 billion as some borrowers started to repay, with many of these emergency loans now becoming due.
The group also reported a rise in current account customers, with nearly 110,000 accounts opened this financial year so far, up from 80,000 at the half-year stage.
The figures come ahead of a busy week for bank results, with Lloyds Banking Group, Barclays, Santander and NatWest all reporting interim figures.