CYBG PLC (LON:CYBG) shares sank as the Virgin Money owner warned that its full-year net interest margin was likely to be at the lower end of its forecasts amid tough competition in mortgage lending.
The banking group, which also owns the Clydesdale and Yorkshire Banks, said it NIM – the difference between money earned from loans and paid on deposits – stood at 168 basis points (bps) in the third quarter, down 3 bps from the first half.
The company, which is in the process of rebranding the business as Virgin Money after buying its Richard Branson-founded rival last year, now expects the NIM towards the end of its 165-170bps guidance range for the year.
However, CYBG chief executive, David Duffy, said: "Our net interest margin is tracking as expected and we delivered further cost efficiencies in the period - even with the twin pressures of Brexit and the highly competitive mortgage market, we remain on track to deliver full year performance in line with our guidance.”
The value of CYBG’s mortgage book dropped by 0.2% to £60.4bn in the third quarter. The group said originations were lower than the previous quarter but at better margins as pricing stabilised.
Business lending edged up 0.5% while personal lending rose 5.7%, supported by demand for credit cards.
The common equity tier one capital ratio - a key measure of balance sheet strength – inched up to 14.6%.
Shares decreased 7% to 184.8p.