CYBG: PPI pushes on for the UK’s latest challenger bank
Clydesdale Yorkshire Bank, one of the UK's latest challengers after it was spun-off by National Australia Bank earlier this year, said net interest margin rose in the six months to the end of March – but it reiterated that PPI is still taking its toll.
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The figures
In a statement this morning Clydesdale – known to its friends as CYBG – said net interest margin was 2.25 per cent in the six months to the end of March, up slightly from the 12-month average of 2.23 per cent, while net interest income rose to £400m, up from £390m during the same period last year.
Underlying profit on ordinary activities before tax dipped, from £111m last year to £107m this year. That's a 4.2 per cent drop.
Meanwhile, mortgage lending rose 9.8 per cent, while loans to small firms increased by 10 per cent to £1bn.
There was one fly in the ointment: it said it had concluded a further charge of £450m was required in order to meet PPI costs. (Although shareholders were already aware – it was already spelled out in black and white, on p87 of NAB's ).
Shares jumped up 1.9 per cent to 241.25p in early trading.
Why it's interesting
Clydesdale may have British pedigree, but it became the UK's latest standalone challenger bank in February when it was spun-off by National Australia Bank (admittedly not at the best time, considering volatility in the equity market in the first part of this year).
Since then, though, shares have performed admirably, rising from its 180p per share offer price to close at 236.5p last night.
But although the lender is viewed by many as a challenger, one issue that's plagued its more established rivals is bringing it down: PPI.
Today it admitted it will have to increase its concession – but added that only 9.7 per cent (some £44m) of that extra charge will actually dent its bottom line, after regulators insisted National Australia Bank set aside £1.7bn to cover the cost of future charges.
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What CYBG said
David Duffy, the company's chief executive, said:
We have a strong momentum in our business, continuing to grow ahead of the market in mortgages and over £1bn of small business loans and facilities were made available in the first half.
Across CYBG we are focusing on the future now with confidence. Delivering great service to our customers is at the heart of our bank and over the next six months I am confident we will show continued progress against our targets and delivery of commitments for our customers, our people and our shareholders.
In short
CYBG is a thoroughly modern bank with a legacy issue, as PPI continues to take its toll.