Pension blow for staff but Clydesdale sees mortgage lending soar

Glasgow-based Clydesdale, which along with sister firm Yorkshire Bank comprises CYBG, has today reported mortgage growth of 5.8 per cent for the nine months to June, as well as ‘record volumes’ of mortgage applications.

The group, which is the 11th largest lender in the UK, said its mortgage lending book reached £22.8bn at the end of June, up from £21.8bn at the end of September. It said the last three months had seen record mortgage application volumes.

Although not confirming a gross mortgage lending figure, CYBG completed £4.9bn of lending in 2016, according to the Council of Mortgage Lenders.

Owner-occupier mortgages accounted for an increasing proportion of lending, in line with CYBG’s aims to target this area. It said 68 per cent of draw downs in the nine months to 30 June were owner-occupier and it is focused on balancing volume growth, margin, and credit quality to capture market share in a low-growth environment.

Meanwhile, the bank’s underlying annual operating cost estimates, which had been in the £690m to £700m range, have been cut to £680m.

This comes following a restructuring programme that has included the closing of 40 Clydesdale Bank branches in 2017 on top of those ditched last year.

Chief executive David Duffy said the performance was a “testament to the success of our restructuring programme”, although more savings are being targeted.

Shares in CYBG leapt nine per cent on the news.

But it was not all good news; CYBG saw customer deposits fall by £800m, in the nine months to June, to £26.2 billion, representing a four per cent fall on an annualised basis, although current account balances grew 6.4 per cent.

Mr Duffy added: “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 £680m which is testament to the success of our restructuring programme.”

Meanwhile, Clydesdale also used the results to also announce the closure of its defined benefit pension scheme to future accruals.

The move comes more than a decade after closing the scheme to new members back in 2005 when it moved from a final to career average salary basis.

CYBG has increased its minimum contribution to the defined contribution pension scheme, which includes about one-third of the group’s staff, from five per cent to eight per cent of a member’s basic salary.

The bank said it will also match up to an additional five per cent paid by employees.

The scheme’s closure to future accrual reduced liabilities in its triennial valuation by £131 million, leaving its overall deficit at £290m.

CYBG said the changes follow a two-month consultation with staff on a number of proposed changes to its pensions and overall reward package, which ended in June 2017, it also noted that the changes will not result in any additional future contributions.