CYBG PLC

CYBG PLC

Post-market close yesterday, CYBG (ASX: CYB) provided an update on its financial performance across the first quarter of the 2019 financial year. CYBG announced that trading for the three months ending 31st December 2018 to be broadly in line with Board expectations and that good progress has been achieved with the Virgin Money integration programme completed on 15th October 2018.

For the unaware, CYBG is a holding company that owns Clydesdale Bank, Yorkshire Bank, Virgin Money UK and the app-based bank B in the United Kingdom, formed by National Australia Bank (NAB) in February 2016. It is listed on the London Stock Exchange and the ASX and is Britain’s sixth-largest bank.

CYBG announced 1.4% growth in the quarter’s customer lending to £71.9 billion, driven by a 1.2% and 1.5% rise in lending to small-and-medium-sized enterprises (SME) and mortgage growth respectively (the latter the more significant of the two components). Net mortgage lending growth for the full year is expected to be lower for the consistent market dynamics and competitive price in that market, whilst SME and unsecured lending growth are expected to remain robust.

On the back of the company’s recent Virgin Money acquisition, it projects it can deliver a minimum £150 million of annual net run-rate cost synergies by the end of the 2021 financial year (higher than £120 million previous anticipated). Note that CYBG has reaffirmed its cost target of less than £950 million for the 2019 financial year.

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CYBG’s net interest margin is anticipated to range between 165 and 170 basis points for the 2019 financial year (172 basis points across the first quarter), on the upper end of previous guidance range.

Notwithstanding, CYBG faces continued uncertainty moving forward given the lingering nature of Brexit and its consequential impact of the economy within the United Kingdom. With that being said, CYBG was the second-strongest performer on the ASX200 through the Thursday session, with investors particular buoyed by the company’s cost-savings program. A positive update, yet given the ongoing outlook uncertainty associated, could be a company investors continue to watch moving forward.

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