CYBG Plc (ASX:CYB) reports continued mortgage growth in quarterly update

CYBG Plc (ASX: CYB) has released its third quarter trading update to investors late this afternoon.

CYBG was spun out of National Australian Bank Ltd (ASX: NAB) and operates the banking chains of Clydesdale and Yorkshire Bank in the UK.

The UK bank revealed that year-to-date mortgage growth was 3.8% for the nine months annualised to 30 June 2018, ending with a total of £24.2 billion.

In late 2017 CYBG brought mortgage processing back to the UK as part of its ‘customer journey improvement initiatives’. Delays arose from this move, which led to reduced application levels. The mortgage balance was £24.1 billion at 31 March 2018.

Core SME showed annualised growth of 4.7%, retail unsecured had annualised growth of 5% and deposits had annualised growth of 4.5%.

The bank reported that the net interest margin (NIM) was 2.18% and re-iterated guidance of around 2.2% for FY18. CYBG said that the mortgage market remains extremely competitive with front book pricing pressure.

The CET1 ratio strengthened to 11.4% with 0.15% of CET1 capital generation in this quarter in line with expectations.

CYBG’s Board was pleased to say that this trading update was in line with expectations.

David Duffy, the CEO of the bank, said “We have delivered another solid performance this quarter, achieving sustainable lending and deposit growth in a highly competitive market while maintaining a stable net interest margin and delivering further cost and process efficiencies in the business. We remain on track to deliver our guidance for FY18.”

Virgin Money acquisition

The Virgin Money acquisition continues to progress and is on track. Shareholder documents are expected to be issued tomorrow with meetings on 10 September 2018 and it’s expected that the transaction will complete in the fourth quarter of the 2018 calendar year.


CYBG said that the political situation in the UK remains uncertain with an unclear impact on the economy. CYBG will continue regardless to try to achieve its FY18 and medium-term targets.

Foolish takeaway

This seemed like a solid update from CYBG. If I had to invest in a pure-bank share on the ASX, I would pick CYBG. Brexit has caused it to be trading at attractive levels, it’s growing its business nicely and the Virgin Money deal could see its earnings trend materially higher over time thanks to synergies and trading under the Virgin name.

It’s currently trading at 12x FY19’s estimated earnings. I’d be happy buying its shares if I wanted some bank shares in my portfolio. But, I don’t, so I personally won’t be buying.

Instead, I’d much rather put my investing cash into one of these top shares. One of which I think is the best financial business on the ASX.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of National Australia Bank Limited. 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 Scott Phillips.

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