CYBG PLC (ASX: CYB) could just be the cheapest ASX-listed bank, and a valuable addition to your portfolio according to one fund manager.

Ausbil Investment Management CEO and Head of Equities Paul Xiradis certainly thinks so in an update for the ASX Investor Update newsletter.

By the way, if you don’t subscribe, you might want to.

Mr Xiradis says Ausbil is one of the fund manager’s preferred bank plays, and cites several risks for the big four of Australia and New Zealand Banking Group (ASX: ANZ), Commonwealth Bank of Australia (ASX: CBA), National Australia Bank Ltd (ASX: NAB) and Westpac Banking Corp (ASX: WBC), including potential to raise more capital, lower dividends, reputational risk, margin pressure, and rising bad debts.

CYBG (short for Clydesdale and Yorkshire Banking Group) unsurprisingly owns the Clydesdale and Yorkshire Banks in the UK. CYBG was demerged from NAB earlier this year and dual-listed on the London exchange and the ASX.

Mr Xiradis says positives include a renewed management and board with autonomy and the ability to focus on their operations and market position. CYBG has the potential to drastically cut its cost-to-income ratio, which currently stands at 72% and the bank is aiming to reduce it to under 60% over the next five years.

The bank also has a strong Tier 1 equity ratio of 13.2% and its loan book is heavily weighted towards residential mortgages.

Valuation wise, CYBG is relatively very cheap, trading on a price to book value of 0.8x, compared to CBA on 2.2x, Westpac on 1.7x, NAB on 1.4x and ANZ on 1.3x.

Mr Xiradis also expects the bank to rerate over the medium term as earnings and returns improve. Hence the reason Ausbil has 3% of its Emerging Leaders Fund in CYBG, and the company ranks in the Top 10 holdings of the fund at the end of May 2016.

CYBG is not without risk, though.

Today’s 5% plus fall in the share price earlier in the day was primarily due to fears of Britain leaving the European Union – otherwise known as “Brexit”. CYBG has been involved in a number of scandals in its past too. NAB has been forced to provide a large indemnity (£1.7 billion) to CYBG against any further compensation claims for payment protection insurance (PPI) or mis-selling of interest rate swaps.

Foolish takeaway

Ausbil is not the only fund manager taking a keen interest in CYBG, and at these prices could be a bargain – outweighing the potential risks. Add CYBG to your watchlist.

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Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.