Mortgage warning sees Clydesdale shares fall

The owner of the Clydesdale and Yorkshire banks boosted its first quarter lending but its shares have taken a hit this week because of concerns about a weaker mortgage market.

Glasgow-based CYBG - which has 2.8 million customers - demerged from National Australia Bank in 2016.

In a trading update yesterday, the group said its mortgage book climbed by 7.4 per cent in the last quarter of 2017, to £23.9 billion.

CYBG said the 7.4 per cent annulised growth came despite market competition eroding net interest margins.

Shares in Clydesdale and Yorkshire Banking Group (CYBG) fell on the news but the group said it still expected a “midsingle digit” percentage increase in mortgage growth for the full trading year.

CYBG’s update also noted that the group saw a 3.7 per cent rise in current account and savings deposits over the first quarter and deposit balances were up year-on-year by 14.8 per cent, at £28.7 billion.

CYBG said the increase was being driven in part by “continued momentum” in retail and in small and medium-sized business current accounts, as well as being helped by demand for its new digital app-based service B, which now boasts 150,000 customers.

Lending to small businesses, meanwhile, lifted by a more muted 1.4 per cent to £6.8 billion on an annualised basis.

CYBG is targeting more than £100 million of cost savings by 2019 – a drive which last year saw the group announce plans to shut about one-third of its branch network in 2017, affecting 400 jobs.

The group is currently investing about £350 million on B and other projects aimed at a new generation of tech-savvy customers.

According to CYBG chief executive, David Duffy, B and other CYBG innvovations – such as the group’s new Studio B branch format – are transforming how people do their banking.

“We remain focused on delivering sustainable and prudent growth”, Mr Duffy said.

“We have delivered another solid quarter of growth, despite a competitive operating environment, seeing continued momentum in both mortgage and SME lending”, he added. “While the economic outlook remains uncertain we remain focused on delivering sustainable and prudent growth and are confident we will deliver our guidance for 2018 and the medium term.”