CYBG shares fall as Q1 rise in home loans comes with slowdown warning

● Clydesdale boss says latest results show further ‘solid’ momentum

The Clydesdale and Yorkshire banking group (CYBG) dis‑ mayed the City yesterday by giving warning that expan‑ sion would slow amid rising competition, overshadowing a first‑quarter rise in mortgage lending.

Glasgow‑based CYBG said the homelending market remained highly competitive, which had hit its net interet margins (NIM) – the differ‑ ence between what banks charge for loans and pay on bank deposits.

Shares in the group, spun off from its former owner National Australia Bank in 2016, closed down 3.7 per cent at 318.8p.

The lender forecast that growth in mortgage loans will slow, although it continues to expect a “mid‑single digit” per‑ centage increase for the full‑ year.

It added: “While the mort‑ gage market remains com‑ petitive, we expect to see price stability through the remain‑ der [of the full financial year].”

The bank said its mortgage book rose an annualised 7 per cent to £23.9 billion in the three months to the end of December. Meanwhile, lend‑ ing to smaller businesses lifted a modest 1.4 per cent to £6.8bn on an annualised basis.

“Strong new business draw‑ downs of £525m were offset by reduced overdraft balances in our agriculture book,” it said in the trading update.

CYBG had already cautioned over the outlook for the mort‑ gage market in November when it posted its first after‑ tax profit for more than five years – at £182 million for the 12 months to 30 September against losses of £164m the previous year.

The bank is also targeting more than £100m of cost sav‑ ings by 2019 – a drive which included CYBG announc‑ ing plans last January to shut around a third of its branch network in 2017 and shed 400 jobs.

The group posted a 3.7 per cent rise in current account and savings deposits over Q1 to £28.7bn – up 14.8 per cent on an annual basis, helped by demand for its new digital app‑ based service “B”. It said its asset quality remained strong with a net cost of risk of 12 basis points, which was in line with expectations.

David Duffy, chief executive of CYBG, said the bank had delivered “another solid quar‑ ter” of growth, with momen‑ tum in mortgages and lending to smaller businesses despite headwinds.

“While the economic out‑ look remains uncertain we remain focused on deliver‑ ing sustainable and prudent growth and are confident we will deliver our guidance for 2018 and medium term,” he added.