The CYBG Plc (ASX: CYB) share price will be on watch this morning after it reported its third quarter to the market.
CYBG is one of the challenger banks in the UK, it operates Clydesdale Bank, Yorkshire Bank and Virgin Money UK. It was spun out of National Australia Bank Ltd (ASX: NAB).
CYBG’s Third Quarter Trading Update
CYBG said that the mortgage book reduced by 0.2% to £60.4 billion because of higher redemptions in the quarter and lower new business volumes.
Business lending growth was 0.5% to £7.7 billion with lower new business volumes in a subdued market. The economy is uncertain with Brexit looming, perhaps a no-deal Brexit.
Personal lending grew by 5.7% to £4.8 billion mostly because of “strong” credit card growth. Customer deposits grew by 1.8% to £62.8 billion.
CYBG Net Interest Margin
In terms of the net interest margin (NIM), it fell by 0.03%, or three basis points, to 1.68% compared to the first half of 2019 due to the re-financing impact of a large volume of mortgage redemptions in the third quarter. The company said that the FY19 NIM is expected to be at the lower end of the 1.65% to 1.70% guidance range.
Virgin Money Integration
The integration of Virgin Money into the business continues to progress with around £45 million of annual cost synergies now delivered.
CYBG Capital Position
CYBG said it remains strongly capitalised with a CET1 ratio of 14.6%.
Payment Protection Insurance (PPI) complaint costs have been broadly in line with provision assumptions. CYBG, along with the rest of the industry, has seen a recent increase in PPI information requests – although the ‘uphold’ rates on these are very low.
Management Comments
CYBG CEO David Duffy said: “The Group continues to deliver on its targets with another quarter of resilient performance including disciplined lending and deposit growth in line with our recently announced strategy.”
Is The CYBG Share Price A Buy?
I think even just the sentiment downside that could happen if a no-deal Brexit were to occur could cause disruption and damage to CYBG, which is why I would want to hold off investing until Brexit is known one way or another.
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