Clydesdale and Yorkshire Bank owner CYBG has cheered a “resilient” half-year performance despite market pressures and costs over its £1.7 billion takeover of Virgin Money.
Shares in the group rose as much as 10% before settling 6% higher as investors welcomed a robust underlying performance, in spite of ongoing signs of an impact from intense competition in the mortgage market.
CYBG – which was catapulted into sixth place in the lending market after its Virgin Money acquisition last October – said it swung to a £42 million profit for the six months to March 31, against losses of £95 million a year earlier.
On a pro-forma basis and including the Virgin Money business dating back to October 2017, underlying pre-tax profits fell 5% to £286 million, although this was better than expected.
But with hefty costs of the takeover and integration expenses included, pro-forma pre-tax profits crashed 80% to £9 million as it also took another hit from the payment protection insurance (PPI) scandal.
The group said it put by another £33 million for conduct charges, including another provision for PPI as claims ramped up ahead of the August deadline.
David Duffy, chief executive of CYBG, said: “The group has delivered a resilient underlying financial performance during the first half of the year and our three-year integration programme is making good progress.”
He added: “Despite sustained competition in the mortgage market and a continued uncertain economic backdrop, we have delivered solid growth in our mortgage book and we have seen signs that mortgage pricing has started to stabilise.”
The group’s net interest income – a key performance measure for retail banks – fell 1% in the first half amid the mortgage market woes.
CYBG said gross mortgage lending rose to £60.5 billion from £59.1 billion a year earlier, but cautioned mortgage lending growth would slow in its second half as it looks to overcome some of the pressure on pricing.
It has already warned that growth in mortgage lending – gross loans less redemptions – will be lower for the full year amid competition and Brexit uncertainties.
The lender recently upped its cost savings target after the Virgin Money deal and is now expecting annual savings of at least £150 million by the end of 2020-21, against the £120 million previously announced.
Its interim results comes after the group saw an investor backlash over bonuses for top bosses earlier this year, with more than a third of shareholders voting against its executive pay plans.
The group said 34.2% of investor votes were made against its pay plans at its annual general meeting (AGM) in Melbourne, Australia.
A further 7.4 million shareholder votes were withheld.
While the plans were approved by 65.8% of shareholders voting in favour, CYBG pledged further talks with investors.