The CYBG PLC (ASX: CYB) share price fell 20% this morning following the release of two updates to the ASX.
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) in 2016.
It has been a terrible year for CYB shareholders. This time last year the bank’s shares were trading above $6.
Following this morning’s slide, CYBG shares are now trading at just $2, some 70% lower than their all-time high of $6.36
Today’s Announcements
CYB released two announcements this morning in relation to legacy payment protection insurance (PPI).
British lenders have spent the past eight years compensating customers who were mis-sold PPI. The policies, some of which dated back decades, were intended to cover missed debt repayments and were often sold using aggressive tactics. In the worst cases, banks misled customers by telling them that PPI was mandatory for loans.
In the first announcement, CYBG said, “The Board of CYBG notes that it has received a number of enquiries regarding the Group’s PPI Information Request and complaint volumes.
Following its Q3 Trading Update on 30 July 2019, the Group, in line with the industry experience, received unprecedented volumes of Information Requests and saw a significant spike in the final days prior to the complaint deadline. The Group also received an increase in complaints during August and a similar spike during the final days.”
As a result, the bank has released a second announcement which says they expect to increase their provision for legacy PPI costs by between £300 million and £450 million.
It seems that in July and August the number of complaints has materially increased and the company has, therefore, had to make a larger provision. They said in August alone they received eight months worth of information requests.
They are currently working to determine the final estimate of costs and expect to release this during their full-year result on 28 November 2019.
Is the CYBG Share Price A Buy?
There’s not much going right for CYB investors at the moment. Brexit continues to provide uncertainty and the cost of the legacy PPI continues to increase.
That said I think the CYB share price could well present an opportunity in the coming months. Once there is less uncertainty with Brexit and more certainty with the cost of the PPI, which investors will find out on 28 November, the shares may be worth pouncing on.
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Disclosure: At the time of writing David does not have a financial interest in any of the companies mentioned.
