Yorkshire Bank's owner CYBG has reported a rise in first quarter lending, but warned that market conditions remain uncertain while the UK awaits the outcome of the Brexit negotiations.
The group, which also owns Clydesdale Bank, said the UK political situation remains "highly uncertain" and the potential impact on the UK economy is unclear, although it is focused on unlocking the opportunities from the Virgin Money acquisition.
CYBG, which became Britain’s sixth largest bank after buying Virgin Money last year, took an exceptional charge of £161m in the quarter relating to the acquisition and forecast £100m more in costs for the rest of the year.
However, shares in CYBG jumped 15 per cent after it increased its cost-cutting targets following the Virgin Money deal. It now expects annual savings of at least £150m by the end of 2020-21, against the £120m previously announced.
It reported a 1.4 per cent rise in customer lending to £71.9bn in its first quarter to December 31 and said the group's full-year net interest margin (NIM) - a key measure of performance for retail banks - would now be at the upper end of previous guidance.
It warned that its net mortgage lending growth will be lower for the full year amid intense competition in the UK mortgage market and Brexit uncertainties.
Chief executive David Duffy said: "The group has made a good start to the year and we are making encouraging progress on the initial stages of the three-year Virgin Money integration programme.
"In a highly competitive environment, we have delivered ahead-of-market lending growth for our customers and improved our NIM guidance for 2019."
CYBG said first quarter mortgage lending rose 1.5 per cent to £60bn and small business lending rose 1.2 per cent to £7.6bn, while customer deposits edged 0.2 per cent higher to £61.1bn.
The lender also reported payment protection insurance (PPI) complaints of about 1,800 a week, but said this was in line with expectations.
Analyst Gary Greenwood at Shore Capital said: "On balance, we think this is a decent update which could drive modest upgrades to consensus, albeit maybe not so much for us given we are already top of the range. We therefore expect the shares to have a bounce following recent weakness. We retain a positive stance with a fair value of 320p (79 per cent upside)."
He issued a 'buy' rating on the stock.
CYBG's figures come just a week after it saw an investor backlash over bonuses for top bosses, with more than a third of shareholders voting against its executive pay plans.
The group said 34.2 per cent of investor votes were made against its pay plans at its annual general meeting (AGM) in Melbourne, Australia.
A further 7.4 million shareholder votes were withheld.
While the plans were approved by 65.8 per cent of shareholders voting in favour, CYBG pledged further talks with investors.