CYBG PLC Interim Results 2019

Our new, enlarged group delivered a resilient underlying financial performance in H1, with integration progressing well. We are now developing customer propositions that leverage our differentiated brand, digital capability and full product suite, and we will set out our ambitions at our Capital Markets Day on 19 June.

Note: this summary is on a pro forma basis as if Virgin Money was acquired on 1 October 2017 (actual completion 15 October 2018)

Resilient underlying financial performance; statutory profit impacted by acquisition and integration costs

  • Pro forma underlying profit before tax of £286m is 5% lower year on year due to the anticipated increase in impairments, but up 2% on h4 18; underlying Return on Tangible Equity (RoTE) was 10.4%
  • Pro forma profit before tax of £9m impacted by significant acquisition and integration costs; statutory profit after tax was £29m due to the tax charge and acquisition timing impact
  • Total underlying income of £843m in the first six months was in line with both H1 18 and h4 18:
    • Net interest income was down 1% on H1 18 with a lower Net Interest Margin (NIM) of 171bps due to the mortgage pricing pressures seen in 2018, although up 1% on h4 18 after pricing started to stabilise
    • Non-interest income was up 11% year on year due to growth in Virgin Atlantic credit card fee income
  • Underlying costs down 3% year on year to £480m; underlying cost to income ratio was 2%pts lower at 57%
  • Impairments increased to £77m; cost of risk of 21bps. In line with expectations reflecting the adoption of IFRS 9, a return to more normal levels in SME, as well as the growth and seasoning of our credit card portfolio

Continued delivery of sustainable customer growth

  • Customer lending growth of 2.4% to £72.7bn driven by:
    • Disciplined mortgage balance growth of 2.5% to £60.5bn
    • SME growth of 1.1% to £7.6bn; strong new business drawdowns of £1.1bn offset by higher redemptions
    • Unsecured balances up 4.2% to £4.5bn with strong growth from the Virgin Atlantic credit cards
  • Customer deposits up 1.2% to £61.7bn with an increase in relationship savings balances as we optimise mix

Integration progressing well; significant acquisition and integration costs incurred during the period

  • Integration programme progressing well with the top two layers of management rationalisation complete
  • Cost synergies being delivered in line with expectations; £33m of annual run-rate synergies realised to date
  • Acquisition and integration costs of £214m includes integration costs of £45m, VM transaction costs of £55m, capital neutral intangible asset write-offs of £127m and other accounting adjustments

Strong capital position maintained; acquisition costs, conduct and distributions impacted capital in H1 19

  • CET1 capital ratio of 14.5%; c.60bps reduction compared to the 30 Sep 2018 pro forma ratio of 15.1% reflects acquisition and integration costs, a small conduct provision top-up, as well as dividend and AT1 distributions
  • Conduct provision top-up of £33m primarily due to increased processing costs from speculative PPI claims

David Duffy, Chief Executive Officer of CYBG PLC commented:

“I am pleased to report that the Group has delivered a resilient underlying financial performance during the first half of the year and our three-year integration programme is making good progress. As previously announced we have also increased our forecast of the total cost synergies available by £30m to a minimum of £150m by the end of FY 2021. We have already realised £33m of annual run-rate cost synergies in the first six months. As expected, profit before tax has been impacted by the significant Virgin Money acquisition and integration costs.

"Our number one priority remains offering our customers attractive products and quality service, and we are pleased to have maintained strong Net Promoter Scores for both our B and Virgin Money brands, while our Clydesdale and Yorkshire Bank NPS continue to improve.

"Despite sustained competition in the mortgage market and a continued uncertain economic backdrop, we have delivered solid growth in our mortgage book and we have seen signs that mortgage pricing has started to stabilise. In our SME business, we have maintained momentum in the origination of new customer facilities and we are also seeing good growth from our Virgin Atlantic credit card proposition.

"We remain on track to deliver 2019 performance in line with guidance and look forward to updating the market in June on our refreshed strategy and the significant opportunities for our combined business.”

Interim Results Announcement 2019(PDF, 1.63 MB , (Opens in a new window)

Interim Results Infographic 2019(PDF, 388 KB , (Opens in a new window)

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CYBG PLC (the ‘Company’), together with its subsidiary undertakings (which together comprise the ‘Group’), operate under the Clydesdale Bank, Yorkshire Bank, B and Virgin Money brands. It offers a range of banking services for both retail and business customers through retail branches, business banking centres, direct and online channels, and brokers. This release covers the results of the Group for the six months ended 31 March 2019.

Statutory basis: Statutory information is set out on pages 43 to 79 of the IFR. The IFRS 9 accounting standard replaced IAS 39 (‘Financial Instruments: Recognition and Measurement’), introducing changes to the classification and measurement of financial instruments and the impairment of financial assets. Virgin Money adopted IFRS 9 on 1 January 2018 and CYBG on 1 October 2018

Pro forma results: On 15 October 2018, the Company acquired all the voting rights in Virgin Money Holdings (UK) plc (Virgin Money) by means of a scheme of arrangement under Part 26 of the UK Companies Act 2006, with the transaction being accounted for as an acquisition of Virgin Money. We believe that it is helpful to also provide additional information which is more readily comparable with the historic results of the combined businesses.

Therefore we have also prepared Pro forma results for the Group as if CYBG PLC and Virgin Money had always been a Combined Group, in order to assist in explaining trends in financial performance by showing a full 6 months performance for the Combined Group for both the current period and prior period, as well as a full 12 month performance of the Combined Group for the most recent year end results. A reconciliation between the results on a Pro forma basis and a statutory basis is included on page 17 of the IFR. The pro forma results are also presented on an underlying basis as there have been a number of factors which have had a significant effect on the comparability of the Group’s financial position and results.

Underlying basis: The pro forma results are adjusted to remove certain items that do not promote an understanding of historical or future trends of earnings or cash flows, and therefore allows a more meaningful comparison of the Group’s underlying performance. A reconciliation from the underlying pro forma results to the pro forma basis is shown on pages 15 to 16 of the IFR and management's rationale for the adjustments is shown on page 80 of the IFR.

Alternative performance measures: the financial key performance indicators (KPIs) used by management in monitoring the Group’s performance and reflected throughout this report are determined on a combination of bases (including statutory, regulatory and alternative performance measures), as detailed at ‘Measuring financial performance – glossary’ on pages 246 to 247 of the Group Annual Report and Accounts for the year ended 30 September 2018.

Certain figures contained in this document, including financial information, may have been subject to rounding adjustments and foreign exchange conversions. Accordingly, in certain instances, the sum or percentage change of the numbers contained in this document may not conform exactly to the total figure given.


The information in this document may include forward looking statements, which are based on assumptions, expectations, valuations, targets, estimates, forecasts and projections about future events. These can be identified by the use of words such as ‘expects’, ‘aims’, ‘targets’, ‘seeks’, ‘anticipates’, ‘plans’, ‘intends’, ‘prospects’, ‘outlooks’, ‘projects’, ‘forecasts’, ‘believes’, ‘estimates’, ‘potential’, ‘possible’, and similar words or phrases. These forward looking statements, as well as those included in any other material discussed at any presentation, are subject to risks, uncertainties and assumptions about the Group and its securities, investments and the environment in which it operates, including, among other things, the development of its business and strategy, any acquisitions, combinations, disposals or other corporate activity undertaken by the Group (including but not limited to the integration of the business of Virgin Money Holdings (UK) plc) and its subsidiaries into the Group, trends in its operating industry, changes to customer behaviours and covenant, macroeconomic and/or geopolitical factors, changes to its board and/or employee composition, exposures to terrorist activity, IT system failures, cyber‐crime, fraud and pension scheme liabilities, changes to law and/or the policies and practices of the Bank of England (BoE), the Financial Conduct Authority (FCA) and/or other regulatory and governmental bodies, inflation, deflation, interest rates, exchange rates, changes in the liquidity, capital, funding and/or asset position and/or credit ratings of the Group, future capital expenditures and acquisitions, the repercussions of the UK’s referendum vote to leave the European Union (EU), the UK’s exit from the EU (including any change to the UK’s currency), Eurozone instability, and any referendum on Scottish independence.

In light of these risks, uncertainties and assumptions, the events in the forward-looking statements may not occur. Forward looking statements involve inherent risks and uncertainties. Other events not taken into account may occur and may significantly affect the analysis of the forward-looking statements. No member of the Group or their respective directors, officers, employees, agents, advisers or affiliates gives any assurance that any such projections or estimates will be realised or that actual returns or other results will not be materially lower than those set out in this document and/or discussed at any presentation. All forward looking statements should be viewed as hypothetical. No representation or warranty is made that any forward-looking statement will come to pass. No member of the Group or their respective directors, officers, employees, agents, advisers or affiliates undertakes any obligation to update or revise any such forward looking statement following the publication of this document nor accepts any responsibility, liability or duty of care whatsoever for (whether in contract, tort or otherwise) or makes any representation or warranty, express or implied, as to the truth, fullness, fairness, merchantability, accuracy, sufficiency or completeness of, the information in this document.

The information, statements and opinions contained in this document do not constitute or form part of, and should not be construed as, any public offer under any applicable legislation or an offer to sell or solicitation of any offer to buy any securities or financial instruments or any advice or recommendation with respect to such securities or other financial instruments.