Historic mis-selling of payment protection insurance (PPI) continues to haunt CYBG (CYBG). With management expecting an additional 83,000 complaints ahead of the August 2019 claims deadline, the challenger banking group took an extra £150m in PPI provisions, pushing the 2018 total to a larger-than-expected £352m. That not only pushed CYBG into a pre-tax loss, but also wiped 1.82 percentage points from the common equity tier one (CET1) ratio, reducing it to 10.5 per cent.
However, gaining approval to use the internal ratings-based approach to calculate credit risk post-year-end boosted the CET1 ratio by 3.5 percentage points. While gross lending rose 4 per cent to £33.3bn, competitive pressures continued to erode the net interest margin, which dipped 0.1 percentage points to 2.17 per cent. Management expects that to decline further to between 1.6 and 1.7 per cent this year.
The battle to win mortgage customers – particularly for the two-year fixed-rate products – has meant rising swap rates are not translating into higher prices, says chief financial officer Ian Smith. The average mortgage yield dropped to 2.73 per cent, from 2.91 per cent.
Ahead of any potential downgrade, analysts at Shore Capital expect adjusted net tangible assets of 299p a share at the March 2019 year-end.
| CYBG (CYBG) | ||||
| ORD PRICE: | 222.8p | MARKET VALUE: | £3.18bn | |
| TOUCH: | 222.6-223.2p | 12-MONTH HIGH: | 367p | LOW: 218p |
| DIVIDEND YIELD: | 1.4% | PE RATIO: | NA | |
| NET ASSET VALUE: | 223p | LEVERAGE: | 15.5 | |
| Year to 30 Sep | Total operating income (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2014 | 0.98 | -234 | na | nil |
| 2015 | 1.03 | -285 | -28.7 | nil |
| 2016 | 1.00 | 77 | -22.5 | nil |
| 2017 | 1.04 | 268 | 17.3 | 1.0 |
| 2018 | 1.01 | -164 | -19.7 | 3.1 |
| % change | -3 | - | - | +210 |
| Ex-div: | 17 Jan | |||
| Payment: | 15 Feb |
