Revealing its first set of results since being spun off by National Australia Bank (NAB) in February, CYBG posted underlying pre-tax profits of £107 million for the six months to the end of March – down from £111m a year earlier as a rise in operating income was offset by higher impairment losses linked to the oil and gas sector.
However, analysts at Macquarie Capital described the figures as “robust”, with CYBG’s interim earnings beating their forecast of £98m. The broker, which has an “outperform” rating on the bank’s shares, has pencilled in a full-year profit figure of £211m.
Earlier this month, the Glasgow-based lender, which also owns the Yorkshire Bank brand, said it had set aside a further £450m to compensate customers who were mis-sold payment protection insurance (PPI). Its total provision for PPI compensation now stands at almost £1.65 billion.
CYBG said today that the eventual costs of PPI redress and complaint handling may differ “materially” from its estimates and “further provision could be required”.
The group, which has £1.8bn remaining to cover “legacy conduct matters” through a combination of on-balance sheet provisions and an indemnity provided by NAB, added: “Accordingly, the final amount required to settle the group’s potential PPI liabilities remains uncertain.”
When asked whether next month’s vote on the UK’s continued membership of the European Union represented a risk to the bank, chief executive David Duffy told The Scotsman: “We have a straightforward domestic business. If there is a variation in the growth outlook, whichever way the vote goes, we have lots of scope to manage the returns from the business.
“Bigger banks may have multiple geographies across Europe, but we’re not troubled by that – in fact, all this chaos represents an opportunity for us because we don’t have those distractions.”
The update came as the group said its lending to small businesses rose by 10 per cent to more than £1bn in the first half of its financial year, while its mortgage book grew by 9.8 per cent.
Duffy said: “I am very pleased to report good progress on all fronts in our first set of results as we execute our strategy as an independent company.
“We have a strong momentum in our business, continuing to grow ahead of the market in mortgages and over £1bn of SME loans and facilities were made available in the first half.”
He added: “We’re seen as a challenger bank but in our heartlands we have ‘big bank’ market shares of 12 to 14 per cent.”
CYBG’s costs for the full year are on track to come in at £730m, below its previous guidance of £762m, thanks to lower-than-expected costs of separating from NAB, which once described the business as a “problem asset”.
Duffy said: “They are a happier shareholder, looking at us from a distance and seeing the value of their shares.”
CYBG last month announced plans to axe 26 branches nationwide and cut jobs. About 150 senior staff are also leaving over the next few months, after the lender launched a voluntary redundancy scheme.
Of the 26 branches being axed between July and September, nine are in Scotland: Bishopbriggs, Blantyre, Bridge of Weir, Cardonald, Coatbridge, Hawick, Lanark, Prestwick Main Street and Tain.
Duffy said: “We’re looking at branches as advice centres now, with a full digital capability, and that means you’re reacting to customer footfall. Some branches are closing, but we’re looking at opening flagships where we can as well – we’ve opened in Glasgow and Leeds and we’re looking at Manchester, Edinburgh and London.
“It’s about giving people longer hours of access, SME and retail in the same branch, with self-help digital capabilities.”
The group currently has 274 branches, along with 40 business banking centres, and employs more than 7,200 people.
No interim dividend was declared, but chief financial officer Ian Smith said CYBG was “sticking to our guns” with an ambition to pay an inaugural annual dividend for the 2017 financial year.