The boss of challenger bank CYBG is expecting industry consolidation in the near future and will be on the lookout for deals.
But chief executive David Duffy today declined to comment on Co-op Bank, with his company linked to the ongoing sale process. Virgin Money is understood to have pulled out of talks with Co-op Bank, and the lender is expected to strike a restructuring deal with a group of US hedge funds.
“I think there is a risk that consolidation will occur increasingly over the next few years, and it will be around traditional banks and non-traditional banks,” Duffy told City A.M. “I think it’s a very difficult world out there.”
He suggested that CYBG will grow to become one of the bigger players in the market.
“We are very clear that we can deliver all that we have promised without doing anything in the market,” he added. “But if something is there that we see as entirely complimentary to our current strategy, and is highly accretive in terms of our performance for shareholders, then we would consider it. But we don’t need to do it to be successful.”
Shares in CYBG, which owns Yorkshire Bank, fell by four per cent this morning after the lender posted its half-year results which missed some expectations. Income grew by 1.2 per cent to £497m, while the firm reduced its cost base by £5m to £348m.
Underlying profit before tax was £123m, up from £107m. But statutory profit before tax fell from £58m to £46m, though this was after taking £53m in restructuring expenses.
Duffy said: “We have delivered for the half-year exactly what we expected. The consensus was a little higher on a couple of things, and that creates share price volatility on the day.” But he said the group is on track to deliver its full-year results in line with expectations.
Goodbody banking analyst John Cronin said his assessment was that the share price was “excessively punished”. He was encouraged by CYBG maintaining its 2017-2019 guidance, saying this would “soothe nerves following the disappointment in mortgage asset yields” reported.