Clydesdale owner’s mortgage woes see £272m wiped off market capitalisation

The owner of Clydesdale Bank, Yorkshire Bank and Virgin Money has seen its bottom line hit by lots of mortgages being paid off.

CYBG signalled its full-year interest-rate margin would be at the lower end of previous guidance as it reported a dip in its mortgage book during the third quarter of its financial year, from £60.5 billion at March 31 to £60.4bn at June 30.

CYBG noted its net interest margin of 1.68 percentage points for the third quarter was down by 0.03 percentage points on the first half of the financial year as it said profit margins were knocked by high numbers of borrowers clearing their debts.

The firm’s total mortgage book fell 0.2pc in value to £60.4bn in the three months to June as it explained “the re-financing impact of a large volume of mortgage redemptions in Q3”

The group, which completed its acquisition of Virgin Money last October, also highlighted the “twin pressures of Brexit and the highly competitive mortgage market” for the disappointing update which sent shares tumbling 12.4pc or 24.61p to 179.9p, wiping £272m off the value of the bank.

And the group pointed to the still unknown final bill for payment protection insurance (PPI) mis-selling as it reported an increase in information requests regarding the scandal ahead of the August 29 deadline set by the Financial Conduct Authority for making complaints.

CYBG, highlighting the increase in PPI information requests, said: “The uphold rates on these are very low, however it is not possible at this stage to determine how many valid complaints will materialise – the group will determine its final costs following the complaint deadline on August 29.”

However, the bank noted continuing growth of its unsecured lending as it highlighted “strong credit card growth” driving its personal lending book up 5.7 per cent during the third quarter, from £4.5bn at March 31 to £4.8bn at June 30.

David Duffy, chief executive officer of CYBG, said: “Our net interest margin is tracking as expected and we delivered further cost efficiencies in the period – even with the twin pressures of Brexit and the highly competitive mortgage market, we remain on track to deliver full-year performance in line with our guidance.”

CYBG has already announced its intention to do away with the centuries-old Clydesdale brand which will be replaced with Virgin Money.

Mr Duffy added: “Our ongoing performance and refreshed strategy under the Virgin Money brand underlines the opportunity we have to create a new force in consumer and business banking.”