The real earnings growth driver for ASX bank stocks in FY21 isn’t what you think

The Virgin Money UK CDI (ASX: VUK) share price will be on watch this morning after the bank posted a big drop in FY20 profit.

But don’t be too caught up in the profit numbers. The real growth driver for the sector isn’t what you think.

The announcement comes on the day that the S&P/ASX 200 Index (Index:^AXJO) is expected to open softer along with other ASX banks.

The UK lender unveiled a 77% crash in full year underlying net profit to £124 million ($225.5 million). This was largely driven by a huge increase in impairments to £501 million from £153 million in FY19.

Virgin Money share price on edge

But even ignoring impairments, operating profit fell 10% to £625 million due to margin squeeze and base rate cuts.

The banks net…