CYBG trading on course for Q3 but mortgage lending under pressure

Clydesdale Bank and Yorkshire Bank owner CYBG has confirmed in its latest results that trading in the three months to 30 June 2018 has been in line with the lender’s board’s expectations and its all-share offer for Virgin Money continues to progress as planned.

The takeover is expected to be completed by the end of this year, the board said, and the groupo’s sustainable balance sheet saw growth despite a competitive environment.

Year-to-date mortgage growth was 3.8 per cent (9 months annualised) to £24.2 billion.

But as CYBG warned at the start of the year, reduced Q3 mortgage drawdowns were felt due to lower applications in Q2.

This trend is expected to continue, with FY18 mortgage growth expected to be at lower end of guidance range.

Core SME growth was 4.7 per cent with £420 million of gross loans and facilities written in Q3.

Deposit balance growth was 4.5 per cent managed in line with asset growth.

David Duffy, chief executive officer of CYBG, said: “We have delivered another solid performance this quarter, achieving sustainable lending and deposit growth in a highly competitive market while maintaining a stable net interest margin and delivering further cost and process efficiencies in the business. We remain on track to deliver our guidance for FY18..

“Our position as one of the UK’s leading digital banks continues to strengthen: in May we launched our fully API-enabled account aggregation for customers and this month we announced a new innovative partnership with PayPal underlining our ability to work with tech players large and small to deliver new and convenient services for customers.

“The economic and political environment in the UK remains uncertain, but we remain focused on delivering our strategic objectives and capturing further growth opportunities. This includes the RBS Alternative Remedies Scheme where we plan to play a significant role following confirmation of the scheme timetable.

“We continue to expect our recommended all-share offer for Virgin Money to complete in calendar Q4 2018, subject to shareholder and regulatory approvals, creating the UK’s first true national competitor to the status quo.”

John Moore, senior investment manager at Brewin Dolphin Edinburgh, said: “Although CYBG’s results highlight some Net Interest Margin pressure, they more importantly show the bank’s story is more about growth in its book and cost savings. The third quarter results show sustainable growth, with further cost and process efficiencies, and encouragingly the bank is firmly focused on strategic delivery to capture future growth opportunities.

“In essence, CYBG is an ‘old bank’ that has been whipped into challenger-bank shape by its current management, following its de-merger from NAB. CYBG, along with Virgin, has been one of the best performing banks in the UK and the forthcoming merger should accelerate and enhances its prospects.”