CYBG Cements Merger With Virgin Money; Earnings Upside Impresses, but So Does Integration Risk
As expected, the boards of U.K. regional bank CYBG and Virgin Money U.K. have agreed to merger terms, with CYBG making an all-share takeover offer valuing Virgin Money at GBP 1.7 billion. Based on CYBG’s numbers, the combined entity is well positioned to benefit from strong earnings growth, but we are concerned with the significant increase in merger integration risks, the risks of overpaying, and risks involved in the planned rebranding of the iconic “establishment†Clydesdale and Yorkshire bra...CYBG is a holding company. Co. operates through the retail and commercial banks Clydesdale Bank, Yorkshire Bank and through the digital banking service B. Co.'s business is organized into two principal operating segments: small or medium sized enterprises (SME) Banking and Retail Banking. Through its SME franchise, Co. provides a range of lending products and services across a portfolio consisting of term lending, overdrafts and working capital solutions. Through its Retail Banking segment, Co. has a retail banking product proposition with a personal deposit portfolio. As of Sept 30 2017, Co. had a total assets of £43.23 billion and total customer deposits of £27.68 billion.
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