Business Irish

Tuesday 20 February 2018

Clydesdale Bank back in black under ceo Duffy

David Duffy, former ceo of AIB
David Duffy, former ceo of AIB
Donal O'Donovan

Donal O'Donovan

Former AIB chief David Duffy's Clydesdale Bank has posted its first full-year pre-tax profit for five years - but shares slumped yesterday.

Clydesdale Yorkshire Banking Group (CYBG) is bidding for Royal Bank of Scotland (RBS) unit Williams & Glyn, a deal that would catapult it into the next tier of UK lenders.

The bank said its engagement with RBS is ongoing, though there is no certainty that any transaction will come about.

CYBG posted an annual loss yesterday after being hit with £152m (€177m) of misconduct and restructuring charges.

The net loss narrowed to £164m (€191m) for the 12 months through September from £229m (€267m) a year earlier, the Leeds-based lender said in a statement yesterday. Excluding the one-time charges, it made its first pre-tax 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 Britain's dominant four lenders. Buying Williams & Glyn would add about £20.4bn (€23.8bn) of assets and give it a balance sheet of about £60bn (€70bn).

Ceo 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 yesterday.

"Capital generation is likely to disappoint, especially given the group's non-binding proposal for W&G."

CYBG slipped 3.3pc to 285 pence at in London trading in the wake of the results for the worst performance among UK lenders. The stock is still up about 58pc since its February initial public offering.

The lender's common equity Tier 1 capital ratio slipped to 12.6pc from 13.2pc 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. (Additional reporting by Bloomberg)

Irish Independent

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