£352m legacy PPI costs drop Yorkshire Bank group back into statutory losses

Yorkshire Bank’s parent, the Clydesdale and Yorkshire Banking Group (CYBG), has returned to reporting an annual statutory loss after paying out legacy PPI costs totalling £352m during the last year.

Publishing its annual results to 30 September, the bank said it had made a statutory pre-tax loss of £145m. Last year the bank had returned to statutory profits for the first time in five years, reporting a statutory pre-tax profit of £182m. It said its return to statutory losses was primarily due to legacy conduct costs of £396m in the year (2017: £58m). Total PPI provision during 2018 was £352m, while the bank also paid out £44m for other legacy conduct.

However, its underlying pre-tax profit was up 13% year-on-year to £331m and the listed bank recommend a dividend payment of 3.1p per share to all shareholders.

The annual results have been published a day after hundreds of small businesses confirmed they were looking to take £350m legal action against CYBG over claims they were mis-sold loans. RGL Management, which represents the SMEs, expects to make a claim against Clydesdale and its former parent, National Australia Bank (NAB), in the first half of next year. RGL alleges that small businesses suffered a loss from tailored business loans that were sold to them between 2001 and 2012.

During the year, CYBG accounted £38m for restructuring and related expenses. It said: “Restructuring of the business is currently ongoing with costs including redundancy payments, property vacation costs, associated enablement costs and non-recurring costs arising from operational transformation.”

It is also now formalising its £75m acquisition of Virgin Money, after receiving shareholder approval for the deal last month. Costs during the year for the acquisition totalled £37m. 

CYBG’s core SME lending portfolio increased by £381m (5.6%) in the year. CYBG said: “We are outperforming the market, despite the subdued demand resulting from Brexit uncertainty, as a result of our strong propositions and sector focus, while maintaining high credit underwriting standards. We are delivering on our pledge to support small and medium sized businesses across the UK as part of our  commitment to lend £6bn in the three years to 2019.”

It reported a total customer lending growth of 4.2% to £28.9bn and a loan growth of 4.1% to £33.3bn.

David Duffy, Chief Executive Officer said: “It has been a landmark year for CYBG, continuing to deliver ahead of market growth and meeting our underlying financial targets in a highly competitive market, while also completing the transformational Virgin Money acquisition in October 2018 following overwhelming shareholder support. 

“In a competitive market, we have delivered an increase in underlying profits, returns and capital generation – all of which means we are delighted to recommend an increase to last year’s inaugural CYBG dividend, payable to all shareholders.

“Clearly Brexit negotiations mean the external political and macro economic environment remains inherently uncertain. We have planned for a period of uncertainty, but it is impossible to ignore the lower levels of business confidence, especially for SMEs, while the final specific outcome of negotiations remains unclear.

“CYBG has a bright future with a unique combination of growth opportunities. We will participate strongly in the RBS alternative remedies schemes, have a stronger competitive edge as the first IRB accredited bank since the financial crisis, can fully leverage our iB platform in the new Open Banking landscape, and, of course, our combination with Virgin Money creates a genuine national competitor to the banking status quo.”

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