Morningstar | CYBG’s 1Q19 Update Impresses, but Brexit Uncertainties Persist
The merger with Virgin Money provides good earnings upside with the combined entity well positioned to benefit from attractive growth, but we are concerned by risks around merger integration, potentially overpaying and rebranding of the iconic establishment Clydesdale and Yorkshire brands to the more edgy Virgin Money brand. Legacy customer conduct issues continue to disappoint, and uncertainty remains. The focus on product innovation, process simplification, cost reduction, and capital optimisation has established a solid platform for growth. The political and economic outlook in the U.K. is uncertain, but the group is heavily focused on the Virgin Money integration and delivering on financial targets. In addition to forecast merger synergies, there is further upside from potential revenue and funding initiatives. A strong capital position, a diversified funding base, and a high-quality loan book impress.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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Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
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