Legacy PPI claims lead CYBG to loss as shares take a hit

● Clydesdale bank owner sees shares slide after it swings to £164m pre-tax loss

CYBG shares slid almost 17 per cent after the bank posted a full-year loss, with costs relating to mis-sold payment protection insurance (PPI) weighing on the group.

The Glasgow-headquartered bank, which owns the Clydesdale and Yorkshire brands, as well as digital-only bank B, reported a pre-tax loss of £164 million for the year to 30 September, compared with a £268m profit in 2017.

This was largely due to redress expenses of £352m linked with historical PPI claims. CYBG also said it would up PPI provisions by £150m as it estimated 83,000 future claims before the August deadline, although complaint volumes have been falling since the end of July.

Shares tumbled by 16.9 per cent to end the day at 206.4p.

However, chief executive David Duffy praised the group’s “strong underlying performance”, with underlyoctober, ing profit before tax up 13 per cent year-on-year to £331m.

Customer deposits grew by more than 4 per cent to £28.9 billion and core lending to small and medium-sized enterprises (SMES) rose 5.6 per cent to £7.2bn. The group announced an increased dividend of 3.1p per share.

Duffy said: “Our disciplined approach to executing on our strategic plan and delivering our commitments has translated into both improved financial performance and strong strategic positioning.

“Clearly Brexit negotiations mean the external political and macro economic environment remains inherently uncertain. We have planned for a period of uncertainty, but it is impossible to ignore the lower levels of business confidence, especially for SMES, while the final specific outcome of negotiations remains unclear.”

He said the group’s acquisition of Virgin Money had created a “genuine national competitor” on the banking stage.

CYBG completed its £1.7bn takeover of Virgin Money in announcing it would transition to the Virgin name and bring to a close the centuries-old Clydesdale brand, although this is to stay in place for at least the next year.

Alasdair Ronald, senior investment manager at Brewin Dolphin Scotland, said: “While the obvious headline is CYBG’S £145m loss – largely attributable to legacy issues – this was a strong set of results for the bank.

“The Virgin Money acquisition should give CYBG greater scale and with that comes the ability to reduce costs. The combination of an operationally-sound business with a strong brand should make the ‘new’ Virgin Money greater than the sum of its parts.”

The results were published the day after consultancy RGL Management announced it would press ahead with a £350m legal action against CYBG on behalf of hundreds of SMES over claims they were mis-sold loans between 2001 and 2012.

A CYBG spokesperson said no claim has been received and, if necessary, “will be defended in the strongest terms possible”.