CYBG, the lender spun off from National Australia Bank, reported a 2.3 percent rise in net interest income for the nine months to June and said it expects to meet its full-year expectations.
The Glasgow-based company, whose brands include Clydesdale Bank and Yorkshire Bank, said trading in three months to June 30 was in line with its expectations and that it was targeting a “modest” inaugural dividend for the current year.
The bank said underlying operating costs for the full year would be below £680m, which is at least £10m lower than previously thought.
CYBG’s mortgage book grew to £22.8bn by June 30, from £22.4bn at the end of March 2017.
CYBG said its net interest margin rose to 229 basis points in the nine months to June from 226 basis points in six months to March, as deposit repricing help offset asset yield pressure.
CYBG said in September last year that it would invest more than £350m over the next two years to reduce costs and increase efficiencies in a tough trading market. The company is targeting more than £100m of sustainable cost reductions by 2019.
Common equity tier one capital ratio - a key measure of financial strength - slipped to 12.4 per cent at June 30 from 12.5 per cent in March on restructuring costs.
Ian Smith, CYBG’s chief financial officer, told The Yorkshire Post that it was good to see increased growth in key business segments.
He added: “We have a strong net interest margin and good management of costs.”
He said the cost reduction programme had been moving a bit faster than anticipated.
Mr Smith confirmed that part of delivering these greater efficiencies involved needing fewer people, although he stressed that any staff reduction was being carried out on a “sensitive basis” .
Figures for the staff reduction programme will be made public when full year figures are published later this year, he said.
Mr Smith said CYBG was committed to retaining a branch network. He said it had been “judicious” in its choice of sites for closure, and had invested in branches that have seen strong customer footfall, such as Briggate in Leeds.
David Duffy, the chief executive of CYBG PLC, commented: “We have delivered another solid performance this quarter, with increased momentum in mortgage and core SME balance growth despite the competitive environment.
“Further operational improvements during the year have enabled customer loan growth and cost efficiencies.
“We remain on track to deliver our guidance for FY (full year) 2017, and now expect underlying operating costs to be below £680m which is testament to the success of our restructuring programme.”
CYBG’s third quarter trading update provided “something to cheer about”, according to analysts at Macquarie Research.
Macquarie said management have delivered an agreement to close the defined benefit pension scheme to further accruals.
The Macquarie note added: “The pension settlement with CYBG employees delivers reasonable de-risking of the investment thesis, reducing NAV/cost drag from additional liability inflation. Although it remains too early to comment on the end point of the cost saving trajectory, the current run rate alludes to a good settlement with pension trustees.”
The note also highlighted the fact that costs are expected to come in £10m better than guidance.