Is the CYBG Plc (ASX: CYB) share price a buy after the UK bank reported its half year result?

CYBG is one of the challenger banks in the UK, it operates Clydesdale Bank, Yorkshire Bank and Virgin Money UK. It was spun out of National Australia Bank Ltd (ASX: NAB).

Here’s What CYBG Reported

The UK bank reported its ‘pro forma’ results as though Virgin Money had been acquired on 1 October 2017, but it was actually acquired on 15 October 2018.

Total underlying income of £843 million in this result was in-line with the first half and second halves of FY18. Net interest income was down 1% because of a lower net interest margin (of 1.71%) but non-interest income was up 11% year on year because of the growth in Virgin Atlantic credit card fee income.

Its underlying profit before tax fell 5% to £286 million year on year because of an anticipated increase in impairments. However, the half year was up 2% on the second half of FY18.

Pro forma profit before tax was £9 million. CYBG said this was impacted by “significant” acquisition and integration costs.

Customer lending growth was 2.4% to £72.7 billion with mortgage growth of 2.5% to £60.5 billion.

Virgin Money Integration

CYBG said that the integration is progressing with its analysis of the two top layers of management (and presumably a few job cuts) completed.

Cost synergies being delivered are in-line with previous projections. £33 million of annual synergies have already been achieved.

The acquisition and integration costs of £214 million were summarised as: integration costs of £45 million, Virgin Money transaction costs of £55 million, intangible asset write-offs and other accounting adjustments of £127 million.

CYBG Balance Sheet And Dividend

CYBG said that its CET1 ratio, a measure of how safely capitalised it is, was 14.5% at the end of the period.

CYBG Management Comments

CYBG CEO David Duffy said: “Despite sustained competition in the mortgage market and a continued uncertain economic backdrop, we have delivered solid growth in our mortgage book and we have seen signs that mortgage pricing has started to stabilise.”

Is CYBG A Buy?

I don’t know much about the UK banking sector, so I can’t offer much of a useful opinion if now is the right time to buy.

The merger with Virgin Money seems compelling and negativity still surrounds UK shares because of Brexit, however I would prefer to buy shares of banks in the middle of a recession, not now.

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Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).

At the time of publishing, Jaz does not have a financial interest in any of the companies mentioned.