Clydesdale Bank owner CYBG has delivered a “solid performance” in its third quarter ahead of its tie-up with Virgin Money.
Releasing a trading update for the three months to the end of June, the group reported mortgage growth of 3.8 per cent to £24.2 billion in the year to date.
Growth in its core small and medium-sized business division amounts to 4.7 per cent so far this year, with £420 million of gross loans and facilities written in the third quarter.
The results showed a reduction in mortgage drawdowns in the three months to June, due to lower applications earlier in the year, and the bank stressed that the mortgage market “remains extremely competitive”.
Deposit balances have risen 4.5 per cent so far this year. CYBG also noted that complaints over the misselling of payment protection insurance (PPI) “remain elevated”, having already been knocked by an extra £350 million charge in additional provisions in the first half of the year.
Chief executive David Duffy told investors: “We have delivered another solid performance this quarter, achieving sustainable lending and deposit growth in a highly competitive market while maintaining a stable net interest margin and delivering further cost and process efficiencies in the business.
“The economic and political environment in the UK remains uncertain, but we remain focused on delivering our strategic objectives and capturing further growth opportunities.”
He added: “We continue to expect our recommended all-share offer for Virgin Money to complete in calendar Q4 [fourth quarter] 2018, subject to shareholder and regulatory approvals, creating the UK’s first true national competitor to the status quo.”
The centuries-old Clydesdale Bank name is set to disappear from Scotland’s high streets following the takeover of Virgin Money in a £1.7 billion deal unveiled last month.
The newly enlarged operation will be headquartered in Glasgow and is seen as a potential competitor to established giants such as Barclay’s and RBS with a customer base of about six million.
John Moore, senior investment manager at Brewin Dolphin Edinburgh, said: “Although CYBG’s results highlight some net interest margin pressure, they more importantly show the bank’s story is more about growth in its book and cost savings.
“In essence, CYBG is an ‘old bank’ that has been whipped into challenger-bank shape by its current management, following its de-merger from NAB. CYBG, along with Virgin, has been one of the best performing banks in the UK and the forthcoming merger should accelerate and enhances its prospects.”