Clydesdale and Yorkshire Banking Group delivers first profits but warns of lending pressures ahead

CYBG chief executive David Duffy
CYBG chief executive David Duffy Credit: Heathcliff O'Malley

Clydesdale and Yorkshire Banking Group (CYBG) will pay a maiden dividend after posting its first after tax profits in five years, but warned a “competitive” lending market would eat into its margins next year.

The challenger bank delivered after tax profits of £182m for the year to September, compared to a £164m loss the previous year.

However it warned a cut-throat mortgage market and economic pressures ahead of Brexit would likely pull its net interest margin down to 2.2pc from 2.27pc last year.

The slim dividend of 1p also underwhelmed investors, sending CYBG shares down more than 1pc by midday trading to around 304p.

Gary Greenwood, analyst at Shore Capital, described the dividend as “somewhat disappointing” given “better than expected profit performance”.

The swing to the black came despite CYBG taking a £58m hit on provisioning for payment protection insurance (PPI) mis-selling.

David Duffy, the bank’s chief executive, said this summer’s PPI advertising campaign starring Arnold Schwarzenegger's disembodied head, run by the Financial Conduct Authority, had led to an uplift in claims.

But he said he was confident the lender now “has enough” cash set aside for PPI payouts ahead of the timebar of August 2019.

Commenting on the tightening lending market, Mr Duffy said: “We said last year we expected competitive economic pressures as Brexit unfolded.

“We’ve guided our net interest margin down a little. It’s in our nature to be conservative.”

CYBG’s underlying pre-tax profits, stripping out one-off costs, rose a third to £293m, helped by an 8pc increase in its mortgage book to £23.5bn.

It also said it plans to invest £350m in its digital banking, including further expanding its online brand B.

“We have the scale of millions of customers but have launched next generation digital products,” Mr Duffy said.

“Unlike a lot of the other banks these operations are live and working.”

CYBG listed and demerged from National Australia Bank in February 2016.

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