Clydesdale results defy Brexit and low expectations

David Duffy

The 1.4 per cent increase in total loans to to £71.9bn in October-December, the first quarter of the bank’s fiscal year, surprised investors as CYBG had warned in November that Brexit-related concerns were subduing the short-term prospects for homeowners and small businesses who are its main customers.

The bank again flagged uncertainties around Britain’s impending departure from the European Union, but said it was working hard to alleviate pressures on customers.

Its shares, which had fallen 28 percent since its warning in November, were up 14 percent at 204 pence by 1000 GMT.

The banking group, which also includes Yorkshire Bank, confirmed that trading in the three months to 31 December 2018 was in line with the Board’s expectations and that good progress has been made with the Virgin Money integration programme.

The acquisition of Virgin Money completed on 15 October 2018; the financial performance and business commentary in this trading update has been prepared on the basis that the combination with Virgin Money had been in effect since 01 October 2017 (see basis of preparation for more details).

CYBG reported Q1 mortgage growth of 1.5 per cent to £60.0bn benefitting from a strong pipeline coming into the quarter and good customer retention.

SME lending growth was up 1.2 per cent to £7.6bn with c.£600m of drawdowns underlining the strength of the Group’s SME strategy and strong demand from our customers.

Group remains strongly capitalised with a CET1 ratio of 14.5 per cent.

Its figures come just a week after it saw an investor backlash over bonuses for top bosses, with more than a third of shareholders voting against its executive pay plans.

The group said 34.2 per cent of investor votes were made against its pay plans at its annual general meeting (AGM) in Melbourne, Australia.

A further 7.4 million shareholder votes were withheld.

While the plans were approved by 65.8 per cent of shareholders voting in favour, CYBG pledged further talks with investors.

David Duffy, chief executive officer of CYBG, said: “The Group has made a good start to the year and we are making encouraging progress on the initial stages of the three-year Virgin Money integration programme.

“In a highly competitive environment, we have delivered ahead-of-market lending growth for our customers and improved our NIM guidance for 2019. We have also made good progress on cost reductions and have now increased our integration synergy target to £150m. 

“I am particularly encouraged by our performance in SME. We are well prepared for the start of the RBS Incentivised Switching Scheme and we hope to attract a large proportion of the 120,000 SME customers that RBS are required to switch. We have also recently submitted our application for a grant from the RBS Capability and Innovation Fund, where we believe we offer the strongest case for delivering a genuine boost to competition in the SME market. 

“Market conditions remain uncertain while we await the outcome of the Brexit negotiations, but we remain focussed on supporting our customers and delivering against the factors within our control.”