LONDON (ShareCast) - (Sharecast News) - CYBG's shares dropped on Tuesday, as it warned that net interest margins were likely to be at the lower end of earlier forecasts as it faced tough competition in mortgage lending.
The banking group, which owns the Clydesdale and Yorkshire Bank brands as well as Virgin Money and 'B', said third quarter net interest margin came in at 168 basis points - three basis points lower than in the first half of the year.

That lead it to expect the full-year figure to be at the lower-end of its 165-to-170 basis point guidance range.

It said the decline came as the firm, which was currently in the process of rebranding as Virgin Money, faced the twin pressures of Brexit and a "highly competitive" mortgage market, though it said it remained on track to deliver full year performance in line with guidance.

The value of the FTSE 250 firm's mortgage book fell 0.2% to £60.4bn in the three month period ended 30 June due to higher redemptions and lower new business volumes, while personal lending growth came in at 5.7% to £4.8bn due to strong credit card growth.

David Duffy, chief executive of CYBG, said: "At our capital markets day in June we set out our plans to disrupt the status quo with new propositions, as well as updated financial, customer service and market share targets.

"Our ongoing performance and refreshed strategy under the Virgin Money brand underlines the opportunity we have to create a new force in consumer and business banking."

Analysts at Shore Capital wrote that, while CYBG was not a stock to "set pulses racing", they believed it was a worthy investment due to the "high degree" of self-help that was embedded in financial forecasts.

"Specifically, we think that significant merger and digital transformation-related cost synergies should help to mitigate the impact of broader competitive and economic pressures, while a well capitalised balance sheet could see surplus returned to shareholders in the longer-term," the analysts said.

CYBG's shares were down 10.63% at 177.75p at 1016 BST.

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