CYBG (CYBG) achieved a significant milestone in its first full-year results statement as a listed company, delivering pre-tax profit for the first time in five years. Admittedly, a change in the tax treatment of its deferred assets resulted in a £164m post-tax loss. However, the challenger bank has made good progress in its double-pronged approach to increasing profitability - growing its core mortgage book for small- and medium-sized (SME) businesses and bringing down costs. Operating profit before impairment losses (which also fell year on year) increased 9 per cent to £260m.
Conduct charges relating primarily to past mis-selling of payment protection insurance were substantially lower at £51m, compared with £486m the previous year. This is thanks to a capped indemnity from former parent Bank of Australia, which reimbursed its former subsidiary. The banking group managed to outperform its cost reduction target, pushing underlying operating and administrative expenses down to £729m. Staff numbers reduced by around 500 to just fewer than 6,500 by the end of September, and 27 branches were closed. Despite this, customer deposit balances increased slightly to £27bn.
Total customer loans increased by 5 per cent to £30.1bn, principally due to an uplift in mortgage lending. However, the average yield achieved on mortgage loans declined to 3.16 per cent, from 3.31 per cent the previous year. This was driven by interest swap movements and increased competition. The overall average yield on interest-earning assets also fell, but cheaper funding meant the net interest margin held steady at 2.6 per cent, while the cost-to-income ratio reduced to 88 per cent from 120 per cent in 2015.
SME lending also grew marginally to £7.2bn, with the core book returning to growth of 6 per cent. News was less good for the unsecured personal lending business, where balances declined by 5 per cent. Personal loan volumes via the bank's digital platform fell and competitive pressures pushed down margins.
Analysts at Shore Capital expect tangible net assets of 297p per share at September 2017, up from 284p the previous year.
CYBG (CYBG) | ||||
|---|---|---|---|---|
| ORD PRICE: | 285.7p | MARKET VALUE: | £2.52bn | |
| TOUCH: | 285.1-285.7p | 12-MONTH HIGH: | 307p | LOW: 179p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 364p | LEVERAGE RATIO: | 13.4 | |
| Year to 30 Sep | Total operating income (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2012 | 1.13 | -803 | na | na |
| 2013 | 0.96 | -49 | na | na |
| 2014 | 0.98 | -234 | na | na |
| 2015* | 1.03 | -285 | -28.7 | nil |
| 2016 | 1.00 | 77 | -22.5 | nil |
| % change | -3 | - | - | - |
*Pre-IPO figures | ||||
