Clydesdale profits take PPI hit with £95m loss

The owner of Clydesdale has slumped into the red, with half-year losses of £95 million after taking a further hit from payment protection insurance.

CYBG – talks over a potential £1.6 billion takeover of Sir Richard Branson’s Virgin Money – was left nursing the loss after recently taking an extra £350m charge for PPI mis-selling claims ahead of the complaints deadline.

The new provision, revealed last month, saw CYBG take a £202m pre-tax charge for the first half, as it said £148m was covered by a conduct indemnity deed with National Australia Bank.

CYBG also put by another £18m for “other legacy conduct issues” during the half-year to March 31.

Its pre-tax losses came against profits of £46m a year earlier.

On an underlying basis, it posted a rise in half-year pre-tax profits to £158m.

CYBG cautioned it expected trading conditions to remain challenging.

However, chief executive David Duffy – who separately announced CYBG would be moving to a single site head office on a yet-to-be-developed site in Glasgow’s Bothwell Street in the coming years – was upbeat about the group’s prospects.

“In the first half of 2018, we have continued to make good progress in delivering our strategic priorities and developing CYBG as the leading alternative to the UK’S big banks,” Mr Duffy said.

“In a competitive market, we have significantly increased underlying profit, up 28% to £158m, while achieving 5% annualised lending growth across both mortgages and SMES.

“While the economic outlook remains uncertain, CYBG is well positioned to continue executing our existing strategy and to capture future growth opportunities across both our retail and SME businesses in the year ahead.

“We continue to deliver innovative technology to our customers and will soon leverage our Open Banking platform with the launch of our new account aggregator and other services to further enhance the customer experience. “

The Virgin Money deal would see the takeover target’s shareholders own around 36.5% of the new business.

It could also mean a major payout for founder Sir Richard Branson, whose Virgin Group holds a controlling stake in the lender.

However, Gary Greenwood at Shore Capital said there were hurdles to overcome before a deal was reached.

“We think it is by no means certain that CYBG will make its proposal formal when the deadline for making such an offer expires on June 4.

“Even then, we think it may need to sweeten its offer in order to get the recommendation of Virgin Money’s management, with a larger premium meaning that more of the benefits would accrue to Virgin Money’s shareholders.”

Shares in CYBG closed down at 305p following trading yesterday.

business@thecourier.co.uk