The CYBG PLC Ltd (ASX: CYB) share price is on watch this morning after the company posted a A$531 million underlying profit after tax in its half-year report at market close.
What were the highlights from the half-year result?
CYBG posted a resilient underlying financial result despite statutory numbers feeling the impact of acquisition and integration costs.
CYBG's total underlying income of GBP843 million (A$1.57 billion) in the first six months was in line with both 1H19 and 2H18 figures, with net interest margin (NIM) for the UK banking group coming in at 171 bps largely due to mortgage pricing pressures.
The company's underlying profit was 5% lower on prior corresponding period due to an anticipated increase in impairments but managed to climb 2% higher on 2H 2018 numbers.
Underlying costs were 3% lower year-on-year (YoY) with underlying cost to income ratio for the group 200 bps lower at 57% for the period.
In terms of customer growth, CYBG saw customer lending growth of 2.4% in the period to GBP 72.7 billion (A$135.1 billion) with disciplined mortgage balance growth, SME growth and unsecured balances on Virgin Atlantic credit cards all driving the result.
Customer deposits rose 1.2% to GBP 61.7 billion (A$114.7 billion) with an increase in relationship savings balances as the group looks to optimise its funding and lending mixes.
In terms of capital adequacy, CYBG reported a common equity tier 1 (CET1) capital ratio of 14.5%, with a 60 bps reduction on 30 September 2018 numbers reflecting acquisition and integration costs, a small conduct provision top-up as well as dividend and additional tier 1 (AT1) distributions.
What's been happening for CYBG?
CYBG PLC is a holding company that owns several banks in the UK including Clydesdale Bank, Yorkshire Bank, Virgin Money UK and B which was established by National Australia Bank Ltd (ASX: NAB) in February 2016.
The major acquisition for CYBG during the period was the addition of Virgin Money to its portfolio for GBP 1.7 billion (A$3.2 billion).
This represents the first statutory profit posted since the October 2018 acquisition, however, it's clear that the acquisition and transition costs weighed on the headline numbers despite strong underlying results.
