Clydesdale posts first profit for five years

Glasgow-based parent company of Clydesdale Bank, CYBG, has delivered its first profit for five years in challenging conditions after reporting a statutory profit of £182 million for the year to September 30, including restructuring and conduct charges.

The results for the group, which also includes Yorkshire Bank, followed a loss of £164 mililon the year before.

The group, which was demerged from National Australia Bank last year, also announced its inaugural shareholder dividend payout of 1p a share.

The group saw mortgage lending rise 8 per cent to £23.5 billion, while lending to small and medium-sized businesses increased 6 per cent to £6.8 billion.

Deposits grew 3 per cent to £27.7 billion as the bank’s profit hike came in spite of a £58 million bottom-line impact largely from higher-than-expected payment protection insurance (PPI) misselling charges.

Shares nudged up 0.8p to close at 309.2p.

But CYBG also gave a more cautious view of the market going forward as it said it was facing stiff competition.

CYBG said in its stock exchange statement: “It is likely that we will see future price pressure in the mortgage and unsecured personal loan market.”

Chief executive David Duffy, who joined the group as CEO in June 2015 and led it through its flotation, said the UK’s biggest banks are getting bigger despite efforts to introduce more competition to the banking sector.

While this week’s results put CYBG head and shoulders above other “challengers” in the industry, Mr Duffy said yesterday that efforts to open up the sector and create competition in a market dominated by the likes of Barclays, HSBC, Lloyds Banking Group and Royal Bank of Scotland were having the opposite effect.

The former Allied Irish Banks CEO explained: “When I came to the UK, there was a hell of a lot of conversation about competition – but the bigger banks just get bigger.”

CYBG, with more than 3 million customers, has scale and other advantages on its side as Britain’s “challenger banks” try to disrupt the market, according to Mr Duffy. “We are the only one that actually has an SME (small and medium-sized enterprise) business, he said, adding: “That’s fundamental.”

CYBG is also investing about £350 million on “transformation” projects including digital brand ‘B’, aimed at a new generation of tech-savvy customers.

According to Mr Duffy, B and other CYBG invovations – such as the group’s new Studio B branch format – are transforming how people do their banking. For examples, SMEs can borrow up to £50,000 in less than 10 minutes.

“This is where the world of banking is going,” he said, adding: “Every other bank is talking about what they will provide in the future. We are doing it.”

Meanwhile, CYBG’s chief financial officer Ian Smith said that while the lender, which closed 40 branches in Scotland last year, keeps branch usage under regular review, there are no plans to repeat the level of wholesale closures it unveiled last year, which was expected to cause 400 job cuts.

Mr Smith said: “We look at this on a regular basis, as you would expect. We did have a significant branch closure programme in 2017, we have no plans to repeat that.”

Mr Smith conceded that the level of claims for PPI (payment protection insurance) mis-selling received by the bank in the last six months had been higher than it anticipated.

The bank announced earlier this month that by September 30 it had set aside a further £403m in “legacy conduct costs” to cover claims, with NAB funding 90 per cent of that provision.

Mr Smith said he expects claims to “tail off from now to the time bar” of August 2019.

Chief executive David Duffy added: “This is a good first step in our three-year plan and we remain fully focused on the delivery of our medium-term targets, which factor in our cautious view of the economic outlook.”