Britain’s Clydesdale bank commits to Virgin Money rebrand and more cost cutting
Banking group lays out plans to challenge big banks and shake up the market
London — Clydesdale and Yorkshire Banking Group (CYBG) has laid out plans to challenge Britain’s big banks, betting that a rebrand as Virgin Money and growth in business banking will help it shake up the market.
The bank pledged to cut further costs and package up offers with other Virgin companies on holidays and flights after its £1.7bn all-share takeover of rival lender Virgin Money in 2018.
At CYBG’s capital markets day in London on Wednesday, the firm pledged to make an additional £50m in annual savings from the Virgin Money deal, taking the total saved by 2022 to £200m.
Bank CFO Ian Smith told investors the additional savings would primarily come from efficiency gains, but repeated a previous estimate that about 1,600 jobs in total are likely to be cut.
CYBG hopes its association with high-profile entrepreneur Richard Branson’s Virgin brand will help fuel growth.
The bank has agreed to pay £15m a year to use the Virgin name, with other companies carrying the name selling services ranging from holidays, flights, gyms and hotels to broadband internet. The bank will start rebranding as Virgin Money by the end of 2019 and will complete the process by 2021.
Investors reacted positively to the refreshed strategy, with shares up nearly 5% early on Wednesday afternoon.
CEO David Duffy told investors the bank’s Virgin Money deal would help it “disrupt the status quo”. But, like other challenger banks, CYBG faces tough trading conditions, with increased competition and economic uncertainty sparked by Brexit pressuring lenders’ profitability.
Despite the rally on Wednesday, CYBG’s shares are down more than a third since the bank first made an offer for Virgin Money in June 2018.
Britain’s banking market is still dominated by a clutch of major lenders, including RBS, Lloyds and Barclays.
CYBG said the enlarged bank would put a greater emphasis on growing in business and unsecured lending, while just maintaining market share in Britain’s competitive mortgage market.
The lender re-affirmed its guidance that its net interest margin — a key measure of underlying lender profitability — would come in at 165-170 basis points in 2019.