SHARES in CYBG tumbled nearly 10 per cent yesterday, after the Clydesdale Bank and Virgin Money owner signalled its full-year interest-rate margin would be at the lower end of previous guidance.
The bank also reported a dip in its mortgage book during the third quarter of its financial year, from £60.5 billion at March 31 to £60.4bn at June 30.
CYBG, which also owns Yorkshire Bank and completed its acquisition of Virgin Money last October, highlighted the “twin pressures of Brexit and the highly competitive mortgage market”. It described the business lending market as “subdued”.
And the banking group noted that it had, in line with the rest of the sector, seen a recent increase in information requests regarding payment protection insurance (PPI) ahead of the August 29 deadline set by the Financial Conduct Authority for making complaints over mis-selling.
Shares in CYBG closed down 19p at 179.9p in the wake of the third-quarter trading update, wiping around £270 million off the banking group’s stock-market worth.
CYBG, highlighting the increase in PPI information requests, said: “The uphold rates on these are very low, however it is not possible at this stage to determine how many valid complaints will materialise – the group will determine its final costs following the complaint deadline on August 29.”
The bank meanwhile flagged continuing growth of its unsecured lending. It highlighted “strong credit card growth” as it noted its personal lending book had climbed by 5.7% during the third quarter, from £4.5bn at March 31 to £4.8bn at June 30.
CYBG noted that its net interest margin of 1.68 percentage points for the third quarter was down by 0.03 percentage points on the first half of the financial year, citing “the re-financing impact of a large volume of mortgage redemptions in Q3”.
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And it declared that it expected its net interest margin for the financial year as a whole to be “at the lower end” of its guidance range of between 1.65 and 1.7 percentage points.
David Duffy, chief executive officer of CYBG, said: “Our net interest margin is tracking as expected and we delivered further cost efficiencies in the period – even with the twin pressures of Brexit and the highly competitive mortgage market, we remain on track to deliver full-year performance in line with our guidance.”
CYBG, which plans to phase out the venerable Clydesdale Bank brand in favour of Virgin Money, attributed the slight dip in its outstanding mortgage balances to “higher redemptions in the period and lower new business volumes in line with the group’s optimisation strategy”.
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It added: “Mortgages saw a small reduction in balances in Q3, consistent with our strategy to optimise for value. Q3 originations were lower than Q2 but at better margins as pricing stabilised. As previously guided, there is a large volume of redemptions in the second half of 2019 which contributed to the contraction in balances.”
The banking group said that its business lending book had grown by 0.5% to £7.7bn during the third quarter. CYBG cited “lower new business volumes in a subdued market, but with a strong Q4 pipeline of new lending”.
CYBG reported a 1.8% rise in customer deposits, from £61.7bn at March 31 to £62.8bn at June 30.
This percentage rate of deposit growth was significantly greater than a 0.2% rise in CYBG’s total customer lending book, from £72.7bn at March 31 to £72.8bn at June 30.
Mr Duffy, who has presided over a programme of branch closures and job cuts at Clydesdale Bank, meanwhile highlighted CYBG’s focus on the Virgin Money brand.
He said: “Our ongoing performance and refreshed strategy under the Virgin Money brand underlines the opportunity we have to create a new force in consumer and business banking.”
CYBG said that its integration programme “continues to progress well” with around “£45m of annual run-rate cost synergies now delivered”.
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