Clydesdale Bank owner CYBG has pleased investors after upping its cost savings target following its £1.7 billion swoop on Virgin Money.
The Glasgow-headquartered group, which also owns Yorkshire Bank, has increased its cost-cutting targets following the Virgin Money acquisition and now expects annual savings of at least £150 million by the end of 2020-21, against the £120m previously outlined.
In a trading update, CYBG reported a 1.4 per cent rise in customer lending to £71.9bn in its first quarter to 31 December and said the group’s full-year net interest margin (NIM) – a key measure of performance for banks – would now be at the upper end of previous guidance.
But it cautioned that its net mortgage lending growth will be lower for the full year amid fierce competition in the UK mortgage market while also flagging up Brexit uncertainties.
The group told investors: “The political situation in the UK remains highly uncertain and the potential impact on the UK economy remains unclear, but the group remains focused on unlocking the opportunities from the Virgin Money acquisition and delivering our [full year] 2019 margin and cost guidance.”
CYBG said its first-quarter mortgage lending lifted 1.5 per cent to £60bn and small business lending rose 1.2 per cent to £7.6bn, while customer deposits edged 0.2 per cent higher to £61.1bn.
The challenger bank reported payment protection insurance (PPI) complaints of about 1,800 a week, but said this was in line with expectations.
John Moore, senior investment manager at Brewin Dolphin Scotland, said: “There is some much hoped-for good news for CYBG investors in this latest update – lending growth is up 1.4 per cent, with mortgage and SME [small and medium-sized enterprise] lending rising 1.5 per cent and 1.2 per cent respectively.
“Meanwhile, the merger with Virgin Money is expected to deliver greater cost savings than previously anticipated. One area of concern will be the bank’s net interest margin, which came under pressure in a highly-competitive mortgage market.”
Last week, the lender suffered an investor backlash over bonuses for top executives after more than a third of shareholders voted against pay plans.
The group said 34.2 per cent of investor votes were made against its pay plans at its annual general meeting, which was held in Melbourne, Australia. A further 7.4 million shareholder votes were withheld.
CYBG said that while the plans were approved, with 65.8 per cent of shareholders voting in favour, it “recognises the large number of votes opposing the resolution” and has pledged further talks with investors.
The group was formerly part of National Australia Bank and still has a large number of Australian shareholders on its register.