Clydesdale Bank owner CYBG has reported pre-tax profits slumping by 80% to £9 million after costs of its deal to buy Virgin Money and another hit from the payment protection insurance (PPI) scandal.
The group said it put by another £33 million for conduct charges, including another provision for PPI as claims ramp up ahead of the August deadline.
On an underlying basis and with the costs of its Virgin Money deal stripped out, pre-tax profits fell 5% to £286 million in what the group described as a "resilient" performance.
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David Duffy, chief executive of CYBG, said: "The group has delivered a resilient underlying financial performance during the first half of the year and our three-year integration programme is making good progress."
He added: "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."
Duffy said the integration with Virgin - which created the UK's sixth largest bank - was going well. Yorkshire Bank is also part of the group.
In figures presented as if Virgin Money was acquired on 1 October 2017 to show comparable performance (actual completion 15 October 2018), underlying profit before tax was £286 million - up 2% on the second half of 2018.
Statutory profit before tax was £42 million compared with a statutory loss of £95 million in the first half of 2018.
Total underlying income of £843 million was in line with both previous half years in 2018. Net interest income was down 1.1% and non-interest income up 11% year on year.
Duffy said: "As previously announced we have also increased our forecast of the total cost synergies available by £30 million to a minimum of £150 million by the end of FY 2021. We have already realised £33 million of annual run-rate cost synergies in the first six months. As expected, profit before tax has been impacted by the significant Virgin Money acquisition and integration costs."
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Donald Brown, head of private clients at Brewin Dolphin Edinburgh, said: “Today’s results from CYBG continue to highlight the substantial impact from the 2017 acquisition of Virgin Money.
“UK domestic earners are clearly under pressure and the growth in customer lending, which is likely thanks to some leveraging of the Virgin brand, can be viewed as encouraging for the group. However, significant acquisition and integration costs still remain so CYBG shareholders may be waiting another year to start reaping the rewards of the merger. Perhaps as expected, underlying profits have been impacted by the acquisition, down 5% compared to this time last year.
“The future for the group post-merger is still being mapped out and the new opportunities and synergies which the company promised as part of the original deal are still awaited.”
