Shares of Yorkshire Bank owner soar after trading update

UPDATE 2 — Shares of Clydesdale and Yorkshire Bank owner CYBG rose about 9% after it announced a positive trading update for the three months to June 30, 2017 and said Clydesdale Bank plc’s defined benefit pension scheme will be closed to future accrual of benefits.

CYBG’s shares rose to around 292p to give it a current stock market value of more than £2.5 billion.

CYBG said its efficiency programme is ahead of schedule and it now expects underlying operating costs for the full year to be below £680 million, ahead of previous guidance of between £690 million and £700 million.

CYBG said: “We saw solid growth in mortgages with balances of £22.8 billion at 30 June, growth of 5.8% on an annualised basis.”

On the same basis, deposits slipped 4% to £26.2 billion.

The company said it continues to target “a modest inaugural dividend with respect to FY17.”

The bank said its annualised net interest margin in the nine months to June 30 was 2.29%, compared to  2.26% in the six months to March 31, as it continues to see the benefits of deposit repricing “and other funding actions” offsetting competitive pressure on asset yields in retail lending.

CYBG said its Clydesdale Bank plc subsidiary reached an agreement that its defined benefit pension scheme will be closed to future accrual of benefits.

“This will have a positive impact in Q4 on the group’s net IAS 19 position going forward of approximately £86 million,” said CYBG.

“The triennial valuation of the scheme has also been agreed, resulting in a reduced deficit of £290 million and no requirement for CYBG to increase contributions to the scheme.

“The scheme’s closure to future accrual reduced the liabilities in the triennial valuation by approximately £131 million.

“These and other actions undertaken in finalising the triennial valuation represent a significant de-risking of the group’s pension scheme obligations and will further underpin the accrued benefits of all of the members of the scheme.”

CYBG chief executive David Duffy said: “We have delivered another solid performance this quarter, with increased momentum in mortgage and core SME balance growth despite the competitive environment.

“Further operational improvements during the year have enabled customer loan growth and cost efficiencies.

“We remain on track to deliver our guidance for FY2017, and now expect underlying operating costs to be below £680 million which is testament to the success of our restructuring programme.

“The digital transformation of CYBG, focused around our market leading iB platform, continues apace and customers are already seeing regular service and products improvements from our £350 million investment programme.

“We now have over 80,000 B accounts opened and the transition of Clydesdale and Yorkshire Bank customers onto the iB platform remains on track, positioning us well for the world of PSD2 and Open Banking.

“While the economic and political environment in the UK remains uncertain, we are focused on delivering our strategic objectives.

“We remain confident that the medium term strategy we outlined at our capital markets day in September 2016 will differentiate us from our competitors and deliver our FY19 targets as we seek to build a better bank for our customers and staff and improve returns for our shareholders.”