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(Alliance News) - CYBG PLC on Tuesday said it remains on track to deliver an annual performance in line with guidance despite a reduction in margin and mortgage lending in the third quarter.
The stock was trading 7.2% lower on Tuesday in London at 184.50 pence a share.
CYBG completed a GBP1.70 billion all-share takeover of Virgin Money Holdings UK PLC in mid-October last year. On Tuesday, CYBG said "good" progress continues to be made with the Virgin Money integration programme. CYBG said its third-quarter financial performance and business commentary have been prepared on the basis that the combination with Virgin Money had been in effect since October 1, 2017.
The owner of the Clydesdale and Yorkshire banks plans to rebrand itself as Virgin Money by the end of this year.
For the three months to June 30, CYBG reported a small decline in net mortgage lending of 0.2% to GBP60.4 billion, due to higher redemptions in the period and lower new business volumes. For the year-to-date, net mortgage lending growth was 3.0%.
Business lending growth in the third quarter was 0.5% to GBP7.7 billion, with lower new business volumes in a subdued market, CYBG said, but with a strong fourth quarter pipeline of new lending.
Meanwhile, personal lending growth in the period was 5.7% to GBP4.8 billion, primarily due to strong growth in credit card lending, the company noted.
The FTSE 250-listed company's CET1 ratio increased slightly to 14.6% as at June 30, due to lower risk asset growth in the third quarter. However, CYBG reaffirmed its target CET1 operating level of 13%.
Net interest margin of 168 basis points for the nine months to the end of June was 3 points lower compared to the six months to the end of March due to the re-financing impact of a large volume of mortgage redemptions in the third quarter, the company explained. CYBG said annual net interest margin is expected to be at the lower end of its 165 basis points to 170 basis points guidance range.
Looking ahead, CYBG said it continues to progress towards its target for GBP200 million of net cost savings by financial 2022 and as at third quarter had realised GBP45 million of annual run-rate savings.
"The group continues to deliver on its targets with another quarter of resilient performance including disciplined lending and deposit growth in line with our recently announced strategy," said Chief Executive David Duffy.
"Our net interest margin is tracking as expected and we delivered further cost efficiencies in the period - even with the twin pressures of Brexit and the highly competitive mortgage market, we remain on track to deliver full year performance in line with our guidance," added Duffy.