The big rally in the share prices of our largest banks following the release of the final report from the Banking Royal Commission has taken the spotlight but there's another bank that's likely to come into frame this morning.
The ASX-listed UK bank CYBG PLC/IDR UNRESTR (ASX: CYB) share price is poised to shoot higher after it released its latest quarterly update at the close of market yesterday.
The results sent its London-listed shares rocketing 14% higher last night and we can expect a big open for the ASX stock, which had suffered a big sell-off late last year on a profit downgrade.
Bouncing back
But sentiment is about to turn. CYBG, or better known as Clydesdale & Yorkshire Bank, said it expects to reap bigger than expected synergies from its merger with Virgin Money last October when it released its December quarter trading update.
CYBG now expects to reap at least £150 million ($273 million) in savings before the end of FY21, which is a whopping 25% increase from its earlier estimates.
This point is made more significant by the fact that many die-hard believers (including myself) have hung on to the stock due to the expected upside from the Virgin Money merger.
The stock had halved in value since hitting a peak of $6.33 in August last year and worries about the impact of Brexit has driven most of the losses.
But the uncertainty created by Brexit hasn't gone away with the British government still struggling to reach an agreement with the European Union before the UK's planned exit from the union in seven weeks.
Growth levers
Despite the turmoil, CYBG has still managed to grow its mortgage business by 1.5% to £60 billion and it credits its "strong pipeline" of customers and "good customer retention" for the growth, although management isn't expecting this to persist given strong competition.
Bottom-line growth will need to come from the Virgin Money merger, cost cutting and small to medium enterprise (SEM) lending.
Its SME loan book posted growth of 1.2% to £7.6 billion and management believes growth will be "robust" thanks to the UK government's program to get smaller lenders to take over SME loans from bailed-out bank RBS.
Unless Brexit turns out to be much worse than anticipated, the CYBG share price has probably seen a bottom.
The turnaround in sentiment towards the UK bank comes at a time when investors are feeling a little more confident about the Commonwealth Bank of Australia (ASX: CBA) share price, Westpac Banking Corp (ASX: WBC) share price, Australia and New Zealand Banking Group (ASX: ANZ) share price and National Australia Bank Ltd. (ASX: NAB) share price.
The banks aren't out of the woods yet though and those looking for blue-chip buying opportunities outside of the sector will want to read this free report from the experts at the Motley Fool.
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