Shareholders in the NAB’s UK orphan Clydesdale Bank (CYB) had themselves to thank for the bottom line in the newly separated company’s first interim results.
The results contained a large charge for mis-sold payment protection insurance (PPI) being disclosed alongside an update on its digital push and some reasonable figures on earnings and capital.
Clydesdale shares jumped 10% on Wednesday after the release of the results to trade around $5.24, 34% higher than its local float price of $3.92.
Clydesdale, which listed in the UK in February, said in last night’s statement that a further charge of 450 million pounds for mis-sold PPI was “considered appropriate to meet current and future expectations of costs.”
But it pointed out that the effect on its bottom line would be significantly reduced due to the 1.7 billion pounds UK regulators had required NAB to set aside prior to their demerger to handle the cost of settling legacy issues, chief among them PPI.
That reserve was approved by NAB (and Clydesdale) shareholders, many of whom are still NAB shareholders as part of the spin-off process.
Clydesdale said that only 44 million pounds of that 450 million would impact the group’s income statement, Clydesdale said. “We consider that, based on our updated assumptions, the total cover remaining of £1.8 billion is sufficient to cover the costs of dealing with legacy conduct matters,” the bank added.
The announcement came as Clydesdale – now known officially as CYBG as it also operates the Yorkshire Bank business – reported its first-half results.
Net interest income rose 2.5% year-on-year to 400 million pounds in the six months to March, while underlying net income fell 4.2% to 107 million pounds.
The bank’s common equity tier one ratio, a measure of financial strength, was 13.2%, up from 12.1% a year earlier.
The bank’s shares began trading at 180p in February and they closed at 236.75p on Monday.
In the statement, CEO David Duffy said:
“We have a strong momentum in our business, continuing to grow ahead of the market in mortgages and over £1 billion of SME loans and facilities were made available in the first half.
“We have also seen encouraging growth in current accounts, with a number of our new products leading the field and making it quicker, simpler and more convenient for customers to access our services."
But compared to its former parent, Clydesdale has a lot of work to do. Underlying return on equity was just 4.5%, NAB’s was more than 14%, The underlying cost to income ratio was a massive 72 cents in the dollar (72%), the NAB’s is under 45%. Its underlying net interest margin was 2.25%, NAB’s, 1.93%.
