Shares of Clydesdale and Yorkshire Bank owner CYBG fell more than 5% on Tuesday as the bank reported a statutory first-half loss of £76 million — and gave no update on its bid for Virgin Money.
The fall in CYBG’s share price will affect the value of its all-share bid for Virgin Money.
Shares of Virgin Money fell more than 3%.
CYBG has until June 4 to either make a firm offer or walk away from its bid for Virgin Money.
CYBG said its first-half underlying profit before tax rose 28% year-on-year to £158 million, but it booked the statutory loss after tax of £76 million due to its PPI legacy costs.
“This shows the strategic imperative for CYBG to deliver on a Virgin deal, because the problem they’ve got is revenue and what’s clear is that a Clydesdale or a Yorkshire bank brand doesn’t cut the mustard,” Edward Firth, managing director for UK banks and Brokerage Keefe, Bruyette & Woods, told Reuters.
“Clearly a Virgin brand across the whole group could revolutionise the outlook, but they’re not paying enough.”
CYBG CEO David Duffy said: “In the first half of 2018, we have continued to make good progress in delivering our strategic priorities and developing CYBG as the leading alternative to the UK’s big banks.
“In a competitive market, we have significantly increased underlying profit, up 28% to £158m, while achieving 5% annualised lending growth across both mortgages and SMEs.
“While the economic outlook remains uncertain, CYBG is well positioned to continue executing our existing strategy and to capture future growth opportunities across both our Retail and SME businesses in the year ahead.
“We continue to deliver innovative technology to our customers and will soon leverage our Open Banking platform with the launch of our new account aggregator and other services to further enhance the customer experience.
“In addition, we are also preparing to compete for the opportunities offered by the RBS alternative remedies package in order to scale our regional SME franchise nationally and to build-out an SME offering that provides a credible near-term competitor to the incumbent banks.”