CYBG shares surge as bank defies Brexit gloom to cheer 'resilient' performance after £1.7bn Virgin Money takeoverCYBG said it performe
CYBG shares surge as bank defies Brexit gloom to cheer ‘resilient’ performance after £1.7bn Virgin Money takeover
- CYBG said it performed well amid economic uncertainty and tough market
- Shares in the bank group rose by 10 per cent following the update
Shares in Clydesdale and Yorkshire Bank owner CYBG rose by 10 per cent earlier this morning after the group posted its latest results following its £1.7billion takeover of Virgin Money.
CYBG said that while it is operating amid a ‘continued uncertain economic backdrop’ and ‘sustained competition’ in the mortgage market, its finances remained ‘resilient.’
The group said it swung to a £42million profit for the six months to 31 March, against losses of £95million a year earlier.
David Duffy, chief executive of CYBG, said: ‘The group has delivered a resilient underlying financial performance’
On a pro-forma basis and including the Virgin Money business dating back to October 2017, underlying pre-tax profits fell 5 per cent to £286million, but this result was better than expected.
But with hefty costs of the takeover and integration expenses included, pro-forma pre-tax profits slumped 80 per cent to £9million as it also took another hit from the payment protection insurance scandal.
The company hiked its provision for PPI claims by £33million, which it blamed on increased processing costs from speculative claims.
The group’s net interest income, which is a key performance measure for retail banks, fell 1 per cent in the first half.
CYBG said gross mortgage lending rose to £60.5billion, up from £59.1billion a year earlier, but cautioned that mortgage lending growth would slow in its second half.
The lender recently increased its cost savings target after the Virgin Money deal and is now expecting annual savings of at least £150million by the end of 2020-21, against the £120million previously announced.
David Duffy, chief executive of CYBG, said: ‘The group has delivered a resilient underlying financial performance during the first half of the year and our three-year integration programme is making good progress.’
He added: ‘Despite sustained competition in the mortgage market and a continued uncertain economic backdrop, we have delivered solid growth in our mortgage book and we have seen signs that mortgage pricing has started to stabilise.’
The group saw an investor backlash over bonuses for top bosses earlier this year, with more than a third of shareholders voting against its executive pay plans. While the pay packages were voted through, the group said it still planned to hold talks on the matter with investors.
Mortgage market: CYBG said gross mortgage lending rose to £60.5billion, up from £59.1billion a year earlier
Russ Mould, investment director at AJ Bell, said: ‘Given the lukewarm numbers served up by its larger peers of late and the disaster story unfolding at Metro Bank, the very positive market response to CYBG’s better-than-expected half year results should not come as a huge surprise.
‘A weak performance for the share price heading into the financial results should be considered in the context of today’s bounce.
‘As the first period to include a contribution from the Virgin Money acquisition, these results offer some early vindication of the deal.
‘Management appear to be excited about the opportunities created by the enlarged business and will get the chance to wax lyrical on these at an investor day on 19 June.
‘Less positive is a tick up in impairment losses – some of which relates to bad debts among business and credit card customers.
‘This is a salutary reminder of one of the key risks facing domestic banks if a chaotic Brexit leads to economic pain.’
CYBG’s shares were up around 10 per cent earlier at 209.3p a share. At present, the group’s share price is up 3.34 per cent or 6.38p to 197.63p.