Clydesdale Bank H1 profits weighted down by PPI charge

Clydesdale and Yorkshire Bank - first half profits down almost 63%, after the group, part of the National Australia Bank, paid out £44m in PPI charges. The group has set aside £450m to cover any future penalties, though Clydesdale and Yorkshire Bank will only pay around 10% of that sum. Total operating income did rise for the first six months of the year, £491m compared to £485m in 2015, while net interest income was up 2.5% YoY. Chief executive, David Duffy said the group was “focusing on the future now with confidence”.

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Clydesdale and Yorkshire Bank Group (CYBG) has reported a near 63 per cent dip in statutory first-half profits weighted down by a £44 million payment protection insurance charge.

The group, which was spun out of National Australia Bank in February and listed on the London and Australian stock exchanges, has booked a further £450 million provision to cover payment protection insurance claims.

CYBG said the charge “is considered appropriate to meet current and future expectations”, in light of the proposed time bar for complaints in summer 2018.

CYBG said it will take just 9.7 per cent of the $450 million charge, equating to £44 million, as former parent group National Australia Bank set aside £1.7 billion to cover misconduct costs in a divestment deal with UK regulators.

Clydesdale Bank has to date booked £1.64 billion in PPI charges.

CYBG confirmed the provision in first-half results which show total operating income rose to £491 million in the six months to March 31, up from £485 million for the same period a year earlier.

Net interest income rose 2.5 per cent year on year to £400 million, and was up 0.7 per cent against the September year end.

Net interest margin rose to 2.25 per cent in the first half against the 12 months average of 2.23 per cent.

However administrative expenses rose two per cent to £353 million, leaving underlying profits before tax down 3.6 per cent to £107 million, and including the PPI provision, £4 million in separation costs and a £1 million gain on capital and debt restructuring, statutory profits were down 62.5 per cent to £58 million (H1 2015: £155 million).

Stripping out one-off costs and charges, operating profits were largely flat at £138 million (H1 2015: £139 million).

The bank notes the mortgage portfolio grew 4.9 per cent in the first half, from £20.5 billion at September 30 last year to £21,51 billion at March 31.

The SME core lending portfolio increased 0.2 per cent in the same period, from £5,99 billion to £6.00 billion, “primarily driven by growth in the Commercial and Structured Asset Finance books”.

Unsecured personal lending balances - credit cards, personal loans and overdrafts – was down 0.9 per cent from £1,21 billion to £1,20 billion as a result of “a managed reduction in personal loan volumes via the web-based digital platform, after competitive pressures reduced margins to unattractive levels over much of the period”.

CYBG chief executive, David Duffy, said: “I am very pleased to report good progress on all fronts in our first set of results as we execute our strategy as an independent company.”

Adding: “We are also progressing with our plans to become a more efficient, responsive and productive business, and now expect our costs for the year to be £730 million, materially below our previous guidance as we begin to see the benefits of actions we have taken to lower the cost base and standalone and separation costs which were lower than expected.

“Across CYBG we are focusing on the future now with confidence.

“Delivering great service to our customers is at the heart of our bank and over the next six months I am confident we will show continued progress against our targets and delivery of commitments for our customers, our people and our shareholders.”