Freed of its National Australian Bank (NAB) parentage, Clydesdale and Yorkshire Banking Group (CYB) has posted its first statutory profit in five years.
The bank posted a pretax profit of £77 million reversing ($A130 million) a £285 million loss ($A480 million) from the previous year in its first set of annual results after being spun off from the NAB.
But the bank was still loss making once tax was taken into account, with losses after tax of £164 million, compared with a loss of £229 million last year, mostly due to changes in accounting treatment of certain assets.
CYBG said its underlying pretax profit was £221 million, increased by 39% from £159 million year-on-year.
Clydesdale said annual profits were boosted by higher mortgage lending in the year to the end of September, which grew by 6.5%, and a 6.1% increase in loans to small businesses.
CYBG CEO, David Duffy said in the statement:
‘In our first year as a PLC, CYBG has delivered on our promises to our customers and shareholders, building strong foundations for our future growth and positive momentum going into 2017. Our annual results show a strong financial performance, with underlying profit up 39% and the first statutory profit before tax in five years through robust growth in mortgages, SME lending and deposits, supported by our ongoing cost reduction programme,” said David Duffy, chief executive of CYBG.
“We are investing in our future, with an investment programme in the next two years of over £350m in part to unlock the potential of CYBG’s digital platform which will drive improvements in our customer experience and distribution capabilities.
“As the only true full service, challenger bank of scale, we are perfectly placed to disrupt the status quo in the UK banking market." Directors said that while lending remains sensitive to economic shocks, “broader based negative effects from Brexit have yet to be observed and prolonged economic stability underpinned by low interest rates and higher employment has supported customer confidence”. CYBG last month sent a bid to buy Williams & Glyn from the Royal Bank of Scotland.
Directors said this said this “engagement is ongoing” and that “there can be no certainty that any transaction will occur, nor as to the terms on which any transaction might be concluded.”
Costs rose 4% to £729 million, and ahead of guidance given at the time of the initial public offering in February. CYBG said in September it was looking at fresh cost-cutting measures, targeting more than £100 million of cost reductions by the end of 2019.
Clydesdale said it is aiming for a double digit return on equity by the end of 2019, a cost-income ratio of 55-58% and loan growth at a mid-single digit percentage rate.
CYBG shares eased 1.6% to $4.89. The results were released after trading closed yesterday.
