CYBG Slumps as Restructuring Costs Push U.K. Bank to 2016 LossRichard Partington
CYBG Plc, which is bidding for Royal Bank of Scotland Group Plc’s Williams & Glyn unit, posted an annual loss after 152 million pounds ($189 million) of misconduct and restructuring charges. The shares slumped.
The net loss narrowed to 164 million pounds for the 12 months through September from 229 million pounds a year earlier, the Leeds, England-based lender said in a statement on Tuesday. Excluding the one-time charges, it made its first pretax profit in five years.
The 178-year-old lender is the largest publicly traded independent bank seeking to wrestle a larger share of the retail market from the Britain’s dominant four lenders. Williams & Glyn would add about 20.4 billion pounds of assets and give it a balance sheet of about 60 billion pounds. Chief Executive Officer David Duffy may struggle to fund and integrate any acquisition while cutting costs to boost profitability, analysts have said.
“There remains significant execution risk for the bank in delivering its strategy,” analysts led by Richard Smith at Keefe, Bruyette & Woods, with an underperform rating on the shares, wrote in a note to clients on Tuesday. “Capital generation is likely to disappoint, especially given the group’s non-binding proposal for W&G.”
CYBG, the operator of Britain’s Clydesdale and Yorkshire banks spun out from National Australia Bank Ltd. earlier this year, slipped 3.3 percent to 285 pence at 9:53 a.m. in London trading for the worst performance among U.K. lenders. The stock is up about 58 percent since its February initial public offering.
The lender’s common equity Tier 1 capital ratio slipped to 12.6 percent from 13.2 percent a year earlier. The bank said it was cutting costs faster than anticipated and would meet its “double digit” return on equity target, a measure of profitability, in 2019, a year earlier than previously planned.