The owner of Clydesdale and Yorkshire banks has slumped into the red with half-year losses of £95 million after taking a hit from the payment protection insurance (PPI) scandal.
CYBG, which is in talks over a potential £1.6 billion takeover of Sir Richard Branson’s Virgin Money, was left nursing the loss after recently taking an extra £350m charge for PPI mis-selling claims ahead of the complaints deadline.
The new provision, which was revealed last month, saw CYBG take a £202m pre-tax charge for the first half, as it said £148m was covered by a conduct indemnity deed with National Australia Bank.
CYBG also put by another £18m for “other legacy conduct issues” during the half-year to 31 March. Its pre-tax losses came against profits of £46m a year earlier.
On an underlying basis, it posted a 28 per cent rise in half-year pre-tax profits to £158m.
CYBG cautioned it expects trading conditions to “remain challenging”, with slowing consumer spending and borrowing and a competitive mortgage market.
It said: “Spending has slowed and businesses have been holding back investment, which has had some impact on demand, but with credit conditions remaining benign.
“In the mortgage market, the economic uncertainty has reduced customer demand, while competition has remained intense and this has resulted in a challenging pricing environment.”
Its net interest margin – a key measure for retail banks – slipped in the first half, highlighting the pressure on challenger banks such as CYBG and the rationale behind its proposed takeover of Virgin Money.
The deal, which was revealed earlier this month, would see Virgin Money shareholders own around 36.5 per cent of the new business.
It could mean a major payout for founder Branson, whose Virgin Group holds a controlling stake in the lender.