CYBG confirms Virgin Money name change amid further cost-cutting

CYBG on Wednesday said it will change its name to Virgin Money UK PLC before the end of the year as it outlined further cost-cutting objectives.

The FTSE 250-traded company, which acquired Virgin Money in summer last year, said an enhanced transformation plan will result in approximately £200m of net cost savings by the 2022 financial year, adding £50m to the £150m of integration synergies previously anticipated by the group.

The Clydesdale Bank and Yorkshire Bank owner maintained its 2019 guidance for underlying costs of £950m and set medium-term financial targets of a reduction in operating costs to below £780m in FY2022 and a cost-to-income ratio in the mid 40%’s.

David Duffy, chief executive of CYBG, said: "Achieving our financial targets will create a significantly more efficient and profitable business with strong and sustainable returns for shareholders. Despite the ongoing Brexit headwinds and continued competitive pressures, the strength of the newly combined group gives us every confidence we will deliver on our targets."

With a view to achieving those "sustainable returns", the company said it was targeting a 50% dividend pay-out ratio.

Duffy added that the business aims to "disrupt the status quo" and create a new force in consumer and business banking by combining the ethos of Virgin Money with CYBG's technology, product expertise and know-how.

Jefferies analysts said the group's targets were ambitious, meaning that investors would likely question elements of the transformation plan such as what was driving the additional incremental £50m of cost synergies.

Meanwhile, analysts from Shore Capital said: "While the broader operating environment for CYBG may be challenging due to competitive pressure and an uncertain macro-economic backdrop, we think CYBG is in a relatively well positioned to navigate this given the protection afforded to its bottom line from the significant merger and transformation cost savings that have been identified and its strong capital position. We remain of the view that the group is significantly undervalued."

CYBG's shares were up 3.91% at 192.70p at 0830 BST.