REG - CYBG PLCClydesdale Bank PLC - Final Results <Origin Href="QuoteRef">CYBGC.L</Origin> - Part 9
22/11/2016 07:08
- Part 9: For the preceding part double click ID:nRSV7721Ph
Senior investment grade 1,077 1,174
Investment grade 1,557 1,615
Sub-investment grade 3,533 2,906
6,167 5,695
Credit quality of loans held at fair value through profit and loss that are neither past due nor impaired:
2016£m 2015£m
Senior investment grade 6 47
Investment grade 259 445
Sub-investment grade 466 580
731 1,072
Collateral held as security
The LTV ratio of retail mortgage lending, coupled with the relationship of the debt to Customers' income, is key to the
credit quality of these loans. The table below sets out the indexed LTV analysis of the Group's Retail mortgage stock:
2016% 2015%
Loan to value ratio: (1)
Less than 50% 38 34
50% to 75% 48 51
76% to 80% 5 5
81% to 85% 3 4
86% to 90% 2 2
91% to 95% 1 1
96% to 100% - -
Greater than 100% - -
Unknown 3 3
100 100
(1)LTV of the mortgage portfolio is defined as mortgage portfolio weighted by balance and indexed using the Halifax house
price index at a given date. Unknown represents loans where data is not currently available due to front book data
matching still to be completed and a de minimis amount due to weaknesses in historic data capture processes.
Non-property related collateral
The following table shows the total non-property collateral held by sector at 30 September 2016 in terms of cash,
guarantees (these guarantors are predominantly other financial institutions who are considered to be of a high quality) and
netting. The exposure amount shown below is the total gross exposure (before any Credit Risk Mitigation and Credit
Conversion Factors have been applied where applicable) for arrangements which have some form of associated collateral held
against it and is not the total exposure for each asset class, as disclosed elsewhere.
Cash Guarantee Netting Total Exposure
2016 £m £m £m £m £m
Central Government or Central Bank 721 - - 721 1,027
Corporates 49 40 32 121 135
Financial institutions 504 - - 504 600
Past due items - - - - 3
Public sector entities - - - - -
Regional Government or local authorities - - 94 94 94
Retail - - - - -
Secured by mortgages on commercial real estate 4 - 35 39 107
Secured by mortgages on residential property 2 - 3 5 12
1,280 40 164 1,484 1,978
Cash Guarantee Netting Total Exposure
2015 £m £m £m £m £m
Central Government or Central Bank - - - - -
Corporates 64 53 57 174 205
Financial institutions - - - - -
Past due items - - - - 4
Public sector entities - - - - -
Regional Government or local authorities - - 114 114 114
Retail - - - - -
Secured by mortgages on commercial real estate 4 - 31 35 86
Secured by mortgages on residential property 2 - 7 9 18
70 53 209 332 427
Forbearance
The tables below summarise the level of forbearance at each balance sheet date.
Retail forbearance
As at 30 September 2016 Total loans and advances subject to forbearance measures Impairment allowance on loans and advances subject to forbearance measures
Numberof loans Gross carrying amount £m % of total portfolio Impairment allowance £m Coverage %
Formal arrangements 1,843 169 0.78% 5.5 3.27%
Temporary arrangements 1,460 160 0.73% 2.7 1.68%
Interest only conversion 154 22 0.10% 0.1 0.26%
Term extension 123 11 0.05% 0.1 0.61%
Other 22 2 0.01% - 0.84%
Legal 195 20 0.09% 1.1 5.60%
3,797 384 1.76% 9.5 2.48%
As at 30 September 2015 Total loans and advances subject to forbearance measures Impairment allowance on loans and advances subject to forbearance measures
Numberof loans Gross carrying amount £m % of totalportfolio Impairment allowance £m Coverage %
Formal arrangements 2,115 179 0.87% 4.0 2.22%
Temporary arrangements 985 99 0.48% 1.5 1.57%
Interest only conversion 88 12 0.06% - 0.15%
Term extension 131 11 0.06% 0.1 0.84%
Other 11 1 0.01% - 0.39%
Legal 216 23 0.11% 1.5 6.56%
3,546 325 1.59% 7.1 2.19%
The Group also has a number of Customers with interest only mortgages past maturity, not subject to forbearance. The Group
has formal processes embedded to proactively track and facilitate prematurity Customer engagement to bring the cases to a
formal conclusion which is generally aimed to be achieved within six months after the loan has reached maturity. Complex
cases can take longer than this to reach conclusion. At 30 September 2016, the Group had 102 (2015: 116) Customers with
interest only mortgages not subject to forbearance and which were post six month maturity with a total value of £12m (2015:
£12m).
A further forbearance reserve of £4m (2015: £4m) is presently held within the overall collective provision. The effect of
this on the above tables would be to increase the impairment allowance noted above to £13.5m (2015: £11.1m) and to increase
overall coverage to 3.52% (2015: 3.42%). When all other avenues of resolution including forbearance have been explored,
the Group will take steps to repossess and sell underlying collateral. In the year to 30 September 2016 there were 78
repossessions of which 27 were voluntary (2015: 87 including 17 voluntary).
Retail forbearance - unsecured consumer credit
The Group currently exercises limited forbearance strategies in relation to other types of consumer credit, including
current accounts, unsecured loans and credit cards. The Group has assessed the total loan balances subject to forbearance
on other types of Retail to be £14m at 30 September 2016 (2015: £18m), representing 1.33% of the unsecured Retail portfolio
(2015: 1.62%). Impairment provisions on forborne balances totalled £4.2m at 30 September 2016 (2015: £5.5m), providing
overall coverage of 29.02% (2015: 29.90%).
SME Forbearance
The tables below summarise the total number of arrangements in place and the loan balances and impairment provisions
associated with those arrangements.
As at 30 September 2016 Total loans and advances subject to forbearance measures Impairment allowance on loans and advances subject to forbearance measures
Number of loans Gross carrying amount £m % of total portfolio Impairment allowance £m Coverage %
Term extension 350 320 4.43% 25.3 7.90%
Deferral of contracted capital repayments 118 143 1.99% 18.2 12.69%
Reduction in contracted interest rate 7 8 0.12% 0.6 7.01%
Alternative forms of payment 7 35 0.48% 11.2 32.37%
Debt forgiveness 8 26 0.36% 2.4 9.16%
Refinancing 22 51 0.70% 4.9 9.76%
Covenant breach/reset/waiver 62 208 2.88% 8.6 4.12%
574 791 10.96% 71.2 8.99%
As at 30 September 2015 Total loans and advances subject to forbearance measures Impairment allowance on loans and advances subject to forbearance measures
Number of loans Gross carrying amount £m % of total portfolio Impairment allowance £m Coverage %
Term extension 491 429 6.00% 42.9 10.02%
Deferral of contracted capital repayments 166 152 2.12% 18.6 12.23%
Reduction in contracted interest rate 17 29 0.40% 6.8 23.64%
Alternative forms of payment 3 16 0.22% 4.5 28.76%
Debt forgiveness 24 55 0.78% 14.2 25.61%
Refinancing 33 61 0.86% 4.7 7.56%
Covenant breach/reset/waiver 62 166 2.32% 6.0 3.64%
796 908 12.70% 97.7 10.77%
Included in other financial assets at fair value is a portfolio of loans which are included in the above table. The value
of fair value loans subject to forbearance at 30 September 2016 is £101m (2015: £162m), representing 1.40% of the total SME
portfolio (2015: 2.27%). Impairment allowances on these amounts totalled £11m (2015: £14m), a coverage of 10.82%
(2015:8.68%).
Credit Quality of Customer Lending
An assessment of the credit quality of loans and advances to Customers is shown below.
As at 30 September 2016
Retail overdrafts£m Credit cards£m Other retail lending£m Mortgages £m Lease finance£m SME lending(1) £m Total£m
Gross loans and advances:
Neither past due nor impaired 57 388 612 21,485 502 5,665 28,709
Past due but not impaired 6 12 15 285 11 144 473
Impaired - - - 66 2 146 214
63 400 627 21,836 515 5,955 29,396
(1) SME lending includes business overdrafts.
As at 30 September 2015:
Retail overdrafts£m Credit cards£m Other retail lending£m Mortgages £m Lease finance £m SME lending(1) £m Total£m
Gross loans and advances:
Neither past due nor impaired 70 363 668 20,170 418 5,277 26,966
Past due but not impaired 9 13 15 268 6 172 483
Impaired - - - 66 2 170 238
79 376 683 20,504 426 5,619 27,687
(1)SME lending includes business overdrafts.
Loans and advances which were past due but not impaired
The distribution of gross loans and advances that are past due but not impaired is analysed below:
2016 Retail overdrafts£m Credit cards£m Other retail lending£m Mortgages £m Lease finance£m SME lending(1) £m Total£m
1 to 29 DPD 5 6 6 81 11 82 191
30 to 59 DPD - 2 3 65 - 27 97
60 to 89 DPD - 1 2 28 - 4 35
Past due 90 days and over 1 3 4 111 - 31 150
6 12 15 285 11 144 473
2015 Retail overdrafts£m Credit cards£m Other retail lending£m Mortgages £m Lease finance£m SME lending(1)£m Total£m
1 to 29 DPD 8 6 5 77 6 110 212
30 to 59 DPD - 2 3 57 - 17 79
60 to 89 DPD - 2 2 36 - 9 49
Past due 90 days and over 1 3 5 98 - 36 143
9 13 15 268 6 172 483
(1) SME lending includes business overdrafts.
Movements in impairment provisions throughout the year are as follows:
2016 Retail overdrafts£m Credit cards£m Other retail lending£m Mortgages £m Lease finance£m SME lending(1)£m Total£m
Opening balance 5 7 11 39 2 166 230
Charge for the year (1) 3 5 1 1 30 39
Amounts written off (4) (9) (14) (2) - (39) (68)
Recoveries of amounts written off in previous years 4 5 7 1 - 1 18
Other(2) (1) - 1 - (1) (3) (4)
Closing balance 3 6 10 39 2 155 215
Specific - - - 19 1 44 64
Collective 3 6 10 20 1 111 151
3 6 10 39 2 155 215
2015 Retail overdrafts£m Creditcards£m Lease finance£m Mortgages £m SME lending(1) £m Other retail lending£m Total£m
Opening balance 8 10 13 27 2 185 245
Charge for the year (2) 5 12 18 1 44 78
Amounts written off (4) (10) (16) (6) (1) (63) (100)
Recoveries of amounts written off in previous years 3 2 2 - - 5 12
Other(2) - - - - - (5) (5)
Closing balance 5 7 11 39 2 166 230
Specific - - - 22 1 69 92
Collective 5 7 11 17 1 97 138
5 7 11 39 2 166 230
(1) SME lending includes business overdrafts.
(2) Other includes the unwind of net present value elements of specific provisions and other minor movements
Movement in gross impaired loan balances throughout the year are as follows:
2016£m 2015£m
Opening balance 238 319
New 96 87
Write off (41) (70)
Returned to performing (79) (98)
Closing balance 214 238
In addition to the gross impaired loans, there were also £19m and £25m impaired fair value loans for September 2016 and
September 2015 respectively.
CYBG PLC
Glossary
Term Definition
90+ DPD to customer loans * Customer loans where the repayment is more than 90 days overdue as a percentage of total customer loans at a given date.
Additional Tier 1 securities (AT1) Securities that are considered additional tier 1 capital in the context of CRD IV.
Arrears A customer is in arrears when they fail to adhere to their contractual payment obligations resulting in an outstanding loan that is unpaid or overdue.
Average assets Represents the average of assets over the year adjusted for any disposed operations.
Bad and doubtful debt charge toaverage customer loans * Impairment losses on credit exposures plus credit risk adjustment on fair value loans to average customer loans (defined as loans and advances to customers, other financial assets at fair value and due from customers on acceptances).
Bank Clydesdale Bank PLC.
Bank Levy Applicable to certain UK financial institutions and UK operations of foreign banks from 1 January 2011. The amount due is based on a percentage of the chargeable equity and liabilities for each applicable entity as at the balance sheet date.
Basel II The capital adequacy framework issued by the Basel Committee on Banking Supervision (BCBS) in June 2006 defining how firms should calculate their regulatory capital requirements.
Basel III Reforms issued by the BCBS in December 2010 to strengthen global capital and liquidity rules with the goal of promoting a more resilient banking sector. In Europe the new requirements were implemented by "CRD IV", on a phased basis from 1 January 2014 with full implementation by 1 January 2019.
Board Refers to the CYBG PLC Board or the CB PLC Board as appropriate.
Capped Indemnity The indemnity from NAB in favour of CYBG PLC in respect of certain qualifying conduct costs incurred by CYBG Group, which is capped at the "Capped Indemnity Amount", subject to the "Loss Sharing Arrangement", under the terms of the "Conduct Indemnity Deed".
Capped Indemnity Amount An amount equal to £1.58 billion less any "Pre Covered provision amount".
Carrying value (also referred toas carrying amount) The value of an asset or a liability in the balance sheet based on either amortised cost or fair value principles.
Collateral The assets of a borrower that are used as security against a loan facility.
Collective impairment provision Impairment assessment on a collective basis for homogeneous groups of loans that are not considered individually significant and to cover losses which have been incurred but have not yet been identified on loans subject to individual assessment.
Commercial paper An unsecured promissory note issued to finance short term credit requirements. These instruments have a specified maturity date and stipulate the face amount to be paid to the investor on that date.
Company CYBG PLC.
Conduct Indemnity Deed The deed between NAB and CYBG PLC setting out the terms of:• The "Capped Indemnity"; and• Certain arrangements for the treatment and management of certain "Conduct Matters".
Conduct Matters In the context of the "Conduct Indemnity Deed", conduct issues relating to PPI, standalone "IRHP", voluntary scope TBL's and FRTBL's and other conduct matters in the period prior to the demerger date whether or not known at the "demerger date".
Conduct risk The risk that the Group's behaviours (culture, governance, systems and controls) have led to inappropriate customer outcomes.
Contractual maturities The date on which the final payment of any financial instrument is due to be paid or received, at which point all the remaining outstanding principal and interest have been repaid in full.
Common Equity Tier 1 capital(CET1) The highest quality form of regulatory capital that comprises total shareholders' equity and related non-controlling interests, less goodwill and intangible assets and certain other regulatory adjustments.
Common Equity Tier 1 ratio * CET1 capital divided by RWAs at a given date.
Counterparty The other party that participates in a financial transaction, with every transaction requiring a counterparty in order for the transaction to complete.
Covered bonds A corporate bond with primary recourse to the institution and secondary recourse to a pool of assets that act as security for the bonds on issuer default. Covered bonds remain on the issuer's balance sheet and are a source of term funding for the Group.
CRD IV European legislation to implement Basel III. It replaces earlier European capital requirements directives with a revised package consisting of a new Capital Requirements Directive and a new Capital Requirements Regulation. CRD IV raises capital and liquidity requirements for European banks and harmonises the European framework for bank supervision. See also "Basel III".
CYBG PLC
Glossary (continued)
Term Definition
Credit risk Risk of financial loss if a customer or counterparty fails to meet a payment obligation under a contract. It arises mainly from direct lending, trade finance and leasing business, but also from products such as guarantees, derivatives and debt securities.
Credit risk adjustment / creditvaluation adjustment An adjustment to the valuation of financial instruments held at fair value to reflect the creditworthiness of the counterparty.
Customer deposits Money deposited by individuals and corporate entities that are not credit institutions, and can be either interest bearing, non-interest bearing or term deposits.
Default A customer is in default when either they have breached a pre-set arrears threshold or are considered unlikely to pay their credit obligations in full without the Group taking actions to secure repayment.
Delinquency See "Arrears".
Demerger The demerger of CYBG Group from NAB pursuant to which all of the issued share capital of CYBI Limited was transferred to CYBG PLC by NAB in consideration for the issue and transfer of CYBG shares to NAB in part for the benefit of NAB (which NAB subsequently sold pursuant to the IPO) and in part for the benefit of NAB shareholders under a scheme of arrangement.
Demerger date 8 February 2016
Derivative A financial instrument that is a contract or agreement whose value is related to the value of an underlying instrument, reference rate or index.
Earnings at risk (EaR) A measure of the quantity by which net interest income might change in the event of an adverse change in interest rates.
Effective interest method The method used to measure the carrying value of certain financial instruments which amortises the relevant fees over the expected life of the instrument.
Encumbered assets Assets that have been pledged as security, collateral or legally "ring fenced" in some other way which prevents those assets being transferred, pledged, sold or otherwise disposed.
Exposure A claim, contingent claim or position which carries a risk of financial loss.
Fair value The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction in the principal (or most advantageous) market at the measurement date under current market conditions
Fair value adjustment An adjustment to the fair value of a financial instrument which is determined using a valuation technique (Level 2 and Level 3) to include additional factors that would be considered by a market participant that are not incorporated within the valuation model.
Forbearance The term generally applied to the facilities provided or changes to facilities provided to assist borrowers, both retail and SME, who are experiencing, or are about to experience, a period of financial stress.
Forborne performing loans Loans to which forbearance measures have been granted and which are less than or up to 90 DPD and do not otherwise meet the criteria of forborne non-performing loans.
Forborne non-performing loans Loans to which forbearance measures have been granted and which are more than 90 DPD, or where the debtor is assessed as unlikely to pay its credit obligations in full without realisation of collateral, regardless of the existence of any past-due amount or of the number of DPD.
Financial Services CompensationScheme (FSCS) The UK's compensation fund of last resort for customers of authorised financial services firms and is funded by the financial services industry. The FSCS may pay compensation if a firm is unable, or likely to be unable, to pay claims against it. This is usually because it has stopped trading or has been declared in default.
Funding risk A form of liquidity risk arising when the liquidity needed to fund illiquid asset positions cannot be obtained at the expected terms and when required.
Gross impaired assets tocustomer loans * Gross impaired assets as a percentage of total customer loans at a given date.
Group CYBG and its controlled entities.
Hedge ineffectiveness Represents the extent to which the income statement is impacted by changes in fair value or cash flows of hedging instruments not being fully offset by changes in fair value or cash flows of hedged items.
Housing lending Mortgages secured by residential properties as collateral
Impaired loans Loans in arrears with insufficient security to cover principal and arrears of interest revenue or where there is sufficient doubt about the ultimate collectibility of principal and interest.
Impairment losses Where an asset's recoverable amount is less than its carrying value and the difference is recognised in the income statement with the carrying value of the asset reduced by creating an impairment allowance. This can be assessed at either the individual or collective level.
CYBG PLC
Glossary (continued)
Term Definition
Impairment allowances A provision held on the balance sheet to recognise that a loan is impaired. This can be calculated at either the individual or collective level.
Indexed LTV of the mortgageportfolio * The mortgage portfolio weighted by balance and indexed using the Halifax House Price Index at a given date.
Interest rate risk The risk to the Group's financial performance and position caused by changes in interest rates.
Interest rate hedging products(IRHP) This incorporates: (i) standalone hedging products identified in the Financial Services Authority (FSA) 2012 notice; (ii) the voluntary inclusion of certain of the Group's more complex tailored business loan (TBL) products; and (iii) the Group's secondary
review of all fixed-rate tailored business loans (FRTBLs) complaints which were not in scope for the FSA notice.
Internal Capital AdequacyAssessment Process (ICAAP) The Group's assessment of the levels of capital that it needs to hold through an examination of its risk profile from regulatory and economic capital viewpoints.
Internal Liquidity AdequacyAssessment Process (ILAAP) The Group's assessment and management of balance sheet risks relating to funding and liquidity.
Internal ratings-based approach(IRB) A method of calculating credit risk capital requirements using internal, rather than supervisory, estimates of risk parameters.
Investmentgrade The highest possible range of credit ratings, from "AAA" to "BBB", as measured by external credit rating agencies.
Level 1 fair value measurements Financial instruments whose fair value is derived from unadjusted quoted prices for identical instruments in active markets
Level 2 fair value measurements Financial instruments whose fair value is derived from quoted prices for similar instruments in active markets and financial instruments valued using models where all significant inputs are observable
Level 3 fair value measurements Financial instruments whose fair value is derived from valuation techniques where one or more significant inputs are unobservable.
Leverage ratio* This is a regulatory standard ratio proposed by the Basel III as a supplementary measure to the risk based capital requirements. It is intended to constrain the build-up of excess leverage in the banking sector and is calculated by dividing Tier 1 capital
resources by a defined measure of on- and off-balance sheet items plus derivatives.
Liquidity coverage ratio (LCR) * Measures the surplus (or deficit) of the a bank's high quality liquid assets relative to weighted net stressed cash outflows over a 30 day period. It assesses whether the bank has sufficient liquid assets to withstand a short term liquidity stress based on
cash outflow assumptions provided by regulators.
Liquidity risk The risk that the Group does not have sufficient financial resources to meet its obligations as they fall due, or will have to do so at an excessive cost. This risk arises from mismatches in the timing of cash flows.
Listing Rules Regulations applicable to any company listed on a United Kingdom stock exchange, subject to the oversight of the UK Listing Authority (UKLA). The Listing Rules set out mandatory standards for any company wishing to list its shares or securities for sale to
the public.
Loan to deposit ratio (LDR) * Customer loans as a percentage of customer deposits at a given date.
Loan to value ratio (LTV) A ratio that expresses the amount of a loan as a percentage of the value of the property on which it is secured.
Loss Share The percentage of a provision raised or an increase in a provision which CYBG PLC will be responsible for under the "Conduct Indemnity Deed". Fixed at 9.7% at the demerger date.
Loss Sharing Arrangement The arrangement relating to the "Capped Indemnity" pursuant to which CYBG PLC will be responsible for the "Loss Share".
Market risk The risk that movements in market risk factors, including foreign exchange rates and commodity prices, interest rates, credit spreads and equity prices, will reduce income or portfolio values.
Net interest income The
- More to follow, for following part double click ID:nRSV7721PjRecent news on Aucyber
See all newsREG - CYBG PLC Clydesdale Bank PLC - Director/PDMR Shareholding <Origin Href="QuoteRef">CYBGC.L</Origin>
AnnouncementREG - CYBG PLC Clydesdale Bank PLC - Total Voting Rights <Origin Href="QuoteRef">CYBGC.L</Origin>
AnnouncementREG - CYBG PLC Clydesdale Bank PLC - Director/PDMR Shareholding <Origin Href="QuoteRef">CYBGC.L</Origin>
AnnouncementREG - CYBG PLC Clydesdale Bank PLC - Director/PDMR Shareholding <Origin Href="QuoteRef">CYBGC.L</Origin>
AnnouncementREG - CYBG PLC Clydesdale Bank PLC - Pillar 3 Disclosures <Origin Href="QuoteRef">CYBGC.L</Origin>
Announcement