Join our community of smart investors

CYBG flat as cost of risk rises

Investors warmed to half-year numbers for the Clydesdale Bank owner, although the details were less than stellar
May 15, 2019

In its first set of full results since its takeover of Virgin Money, Clydesdale Bank owner CYBG (CYBG) trumpeted a “resilient underlying performance in challenging market conditions”. A less spin-filled description of interim figures might simply read 'flat'.

IC TIP: Hold at 203p

That’s no bad thing, given the broader struggles in UK banking. But on a pro-forma basis, there was little sign of a rebound in the six months to March 2019. While operating costs fell 3 per cent to £480m, a 60 per cent jump in impairments to £77m ultimately caused underlying pre-tax profits to drop 5 per cent, and knocked 13 basis points off the net interest margin, to 1.71 per cent.

This increase in the cost of risk should not come as a surprise, says management, pointing to the “normalisation” of interest rates. But areas where the bank might exert a little more control, such as attracting new customers, aren't exactly delivering. During the period, deposits grew by just 1.2 per cent to £61.7bn and small business lending rose by a similar ratio to £7.6bn.

Against this backdrop, investors have been promised a refreshed strategy and “new division overviews” at next month’s capital markets day. Consensus analyst forecasts are for earnings of 24.5p a share in the year to September, rising to 26p in FY2020.

CYBG (CYBG)    
ORD PRICE:203pMARKET VALUE:£2.9bn
TOUCH:202.7-203p12-MONTH HIGH:367pLOW: 172p
DIVIDEND YIELD:1.5%PE RATIO:NA
NET ASSET VALUE:375pLEVERAGE18.4
Half-year to 31 MarTotal operating income (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
2018503-95-10.2nil
2019926420.2nil
% change+84---
Ex-div:n/a   
Payment:n/a