CYBG sets out case for taking over Virgin Money, argues it deserves RBS bailout cash boost

RBS must hand out the cash to rivals in return for its taxpayer bailout in 2008

REUTERS

Simon English, Financial Editor @SimonEngStand15 May 2018

CYBG today set out a case for taking over Virgin Money and landing a large slice of the £750 million of cash RBS is being forced to distribute to rivals by regulators.

RBS must hand out the cash to rivals in return for its taxpayer bailout in 2008. The cash is to boost competition in small-business banking, an area where the owner of the Clydesdale and Yorkshire banks can claim strength.

Chief executive David Duffy said that for the Treasury plan to work it needs to pick a bank that has “a strong existing capability” and experience of switching accounts efficiently.” That criteria, he said, made CYBG the most suitable.

In the half-year, amid concern about consumers over-stretching, bad debts at CYBG fell to £22 million, evidence of its prudence, said Duffy.

CYBG couldn’t talk about the £1.6 billion offer for Virgin, ahead of a formal bid which is expected by the City to emerge soon.

The bank’s profits for the half-year rose 28% to £158 million, but it fell to a statutory loss of £76 million because of PPI costs. Shares fell 5% to 305p.

CYBG thinks its strength in business banking and current accounts, when combined with Virgin’s position in mortgages and savings accounts would create a real challenger to the High Street giants. Duffy thinks CYBG will become the “leading alternative to the UK’s big banks”.

But he cautioned that growth could be slower than hoped because of a “fierce” competitive environment and a sluggish economy.

Duffy said the “outlook remains uncertain”, and chief financial officer Ian Smith added: “I think consumers and businesses are more jittery. That’s related to political turmoil that feeds through into confidence.”