20th Nov 2018 09:08
LONDON (Alliance News) - CYBG PLC on Tuesday said that costs from mis-selling payment protection insurance resulted in a pretax loss in its recent financial year and that the short-term outlook for the bank's key markets - UK homeowners and small and medium sized businesses - is more subdued than in recent years.
Shares in the Glasgow-headquartered lender were trading 8.9% lower at 226.40 pence each, the worst performer in the FTSE 250 index of London mid-cap stocks.
The subdued short-term outlook was attributed to a continued decline in the UK household savings ratio and Brexit uncertainty. The lender said that it is well prepared for an orderly Brexit and has made contingency plans for alternative scenarios.
"Clearly Brexit negotiations mean the external political and macro economic environment remains inherently uncertain. We have planned for a period of uncertainty, but it is impossible to ignore the lower levels of business confidence, especially for SMEs, while the final specific outcome of negotiations remains unclear," Chief Executive David Duffy said.
The company, which operates the Clydesdale Bank and Yorkshire Bank brands and recently bought rival Virgin Money, also said it continues to see strong competition for mortgages and deposits in the year ahead, which will put pressure on margins.
Net interest margin for 2019 financial year is predicted to be between 1.6% and 1.7%, having been rebased following the combination with Virgin Money. In the year that ended September 30, the company's net interest margin stood unchanged at 2.17%.
Adjusted operating expenses for the 2019 financial year are expected to be less than GBP950 million, down from an estimated pro forma combined cost base of GBP985 million in the recently completed financial year.
CYBG recorded a pretax loss of GBP164 million for the year ended September 30, compared with pretax profit of GBP268 million the year prior, on a net interest income of GBP851 million and GBP844 million, respectively.
The swing to pretax loss was primarily attributed to GBP396 million in legacy conduct charges, up sharply from GBP58 million in the year ago period. PPI provision during 2018 financial year totalled GBP352 million, with GBP44 million for other legacy conduct issues.
The lender said it will make an additional GBP150 million in provisions for PPI to cover costs associated with a revised estimate of 83,000 future walk-in complaints.
"While the additional PPI provision charge required in 2018 is disappointing, the group's strong capital position means we have been able to absorb this without any impact on our strategy and future ambitions," Duffy said.
The company has lifted its final and total dividend for 2018 financial year to 3.1p per share from 1p paid a year ago.
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