REG - CYBG PLCClydesdale Bank PLC - Half-year Report <Origin Href="QuoteRef">CYBGC.L</Origin> - Part 8
16/05/2017 07:06
- Part 8: For the preceding part double click ID:nRSP1995Fg
assets that are not deducted.
(3) CET1 capital is comprised of shares issued and related share premium, retained earnings and other reserves less specified regulatory adjustments.
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Total Tier 1 capital for the leverage ratio
Total CET1 capital 2,413 2,397
AT1 capital 450 450
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Total Tier 1 2,863 2,847
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Exposures for the leverage ratio
Total assets as per published financial statements 40,228 39,929
Adjustment for off-balance sheet items 2,128 1,982
Adjustment for derivative financial instruments (286) (399)
Adjustment for securities financing transactions (SFTs) 936 601
Regulatory adjustments and deductions (376) (364)
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Leverage ratio exposure 42,630 41,749
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Leverage ratio 6.7% 6.8%
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6.7%
6.8%
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FUNDING AND LIQUIDITY RISK
Funding risk relates to the impact on the Group's strategy of being unable to raise funds from customers and the wholesale
markets of sufficient quantity and of appropriate mix and tenor. An inability to raise sufficient funds may lead to a
reduction in lending growth or a requirement to raise the price paid for deposits, both outcomes having an adverse effect
on shareholder value. Where funding risk manifests itself in an adverse effect on mix and tenor, for example a high
proportion of short term wholesale deposits, there is an increased liquidity risk to the Group.
Liquidity risk is the risk that the Group is unable to meet its current and future financial obligations as they fall due
at acceptable cost. These obligations include the repayment of deposits on demand or at their contractual maturity dates,
the repayment of borrowings and loan capital as they mature, the payment of operating expenses and tax, the payment of
dividends and the ability to fund new and existing loan commitments.
SUPPLEMENTARY RISK MANAGEMENT DISCLOSURES
External credit ratings
The Group's long-term credit ratings are summarised below:
Outlook as at As at
─────────────────────────── ────────────────────────────────────────────────────
15 May 2017 (1) 31 Mar 2017 30 Sep 2016
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CYBG PLC
Fitch Stable BBB+ BBB+
Standard & Poor's Negative BBB- BBB-
Clydesdale Bank PLC
Fitch Stable BBB+ BBB+
Standard & Poor's Negative BBB+ BBB+
Moody's(2) Stable Baa2 Baa2
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(1) For detailed background on the latest credit opinions, by S&P and Fitch, please refer to the respective rating agency websites.
(2) Long-Term Deposit Rating
Funding and liquidity
The Group continues to have a strong funding and liquidity position and seeks to achieve an appropriate balance between
profitability and liquidity risk. Funding is predominantly provided by retail and SME customers, and is supported by
medium term secured funding issuance from the Group's Lanark and Lannraig securitisation programmes and its Regulated
Covered Bond platform. These funding programmes are a source of strength for the Group and leverage the Group's high
quality mortgage book. The Group ensures that funding is in place before lending to customers.
The BoE launched the TFS in 2016 to allow banks and building societies to borrow from the BoE at rates close to bank base
rate. TFS was designed to reinforce the transmission of the August base rate cut (and potential future rate cuts) to those
interest rates actually faced by households and businesses. The Group is supportive of these aims and reduced its standard
variable rate mortgage rate by the full 0.25% following the rate cut. The Bank drew down £1,900m from the scheme during
the half year which supports this rate reduction by reducing the Bank's overall funding cost and is intended to provide
support to lending growth throughout 2017.
The LDR increased from 112% to 117% during the half year due to growth in customer lending combined with a managed
reduction in short-term corporate deposits which provided little liquidity benefit to the Group.
The Group's liquid assets are calibrated to the Board's view of liquidity risk appetite and remain at a prudent level above
PRA requirements. The portfolio is managed by diversifying the mix of assets held to reduce basis risk and optimise the
yield. Core liquidity is held predominantly in deposits with central banks, UK Government Gilts, bonds issued by
supranational agencies and high quality covered bonds. Total unencumbered liquid assets were managed lower from £5,081m to
£4,158m. This is primarily due to a lower balance with the BoE as a result of the lending growth and deposit actions
described above. The Group was compliant with all internal and regulatory liquidity metrics at 31 March 2017.
SUPPLEMENTARY RISK MANAGEMENT DISCLOSURES
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Cash and balances with central banks 5,422 5,955
Encumbered cash balances (2,648) (2,468)
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2,774 3,487
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Financial assets available for sale 1,994 1,695
Encumbered available for sale securities (610) (101)
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1,384 1,594
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Total unencumbered liquid assets 4,158 5,081
═════════════════════════════════════════════════════════════════════════════════
4,158
5,081
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In addition to the above, as at 31 March 2017, the Group had £6.4bn (30 September 2016: £2.8bn) of gross eligible
collateral pre-positioned with the BoE for potential use in its liquidity facilities.
Liquidity composition
Liquid assets 31 Mar 2017(unaudited)£m 30 Sep 2016(audited)£m
─────────────────────────────────────────────────────────────────────────────────
UK Government Treasury Bills and Gilts 1,254 1,286
Cash and cash at central bank 3,060 3,773
Note cover (1) 2,362 2,182
Other debt securities 739 409
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7,415 7,650
═════════════════════════════════════════════════════════════════════════════════
(1) Note cover is excluded from PRA regulatory liquidity.
SUPPLEMENTARY RISK MANAGEMENT DISCLOSURES
Encumbered assets by asset category
Examples of reasons for asset encumbrance include, amongst others, supporting the Group's secured funding programmes to
provide stable term funding to the Group, use of assets as collateral for payments systems in order to support customer's
transactional activity and, providing security for the Group's issuance of Scottish banknotes. The ability to encumber
additional assets will also support any future activity through the TFS. The Group monitors the level of asset encumbrance
to ensure an appropriate balance is maintained.
As at 31 March 2017
Assets encumbered with non-Central Bank counterparties Other assets Total£m
CoveredBonds£m Securiti-sations£m Other£m Total£m Positioned atthe CentralBank(includingencumbered)£m Assets not positioned at theCentral Bank Total£m
Readilyavailableforencum-brance£m Otherassetscapableof beingencum-bered£m Cannotbeencum-bered£m
Cash and balanceswith central banks - - - - 2,648 2,774 - - 5,422 5,422
Due from other banks 196 386 327 909 - - 263 - 263 1,172
Investments -available for sale - - 512 512 98 1,383 36 - 1,517 2,029
Other financial assets - - - - - - 570 - 570 570
Derivatives - - - - - - - 356 356 356
Loans and advances tocustomers 998 4,473 - 5,471 6,392 5,027 10,021 3,003 24,443 29,914
Intangible Assets - - - - - - - 298 298 298
Deferred tax assets - - - - - - - 162 162 162
Other assets - - - - - - 110 195 305 305
───────────────────────────────────────────────────────────────────
Total Assets 1,194 4,859 839 6,892 9,138 9,184 11,000 4,014 33,336 40,228
═══════════════════════════════════════════════════════════════════
As at 30 September 2016
Assets encumbered with non-Central Bank counterparties Other assets Total£m
CoveredBonds£m Securiti-sations£m Other£m Total£m Positioned atthe CentralBank(includingencumbered)£m Assets not positioned at theCentral Bank Total£m
Readilyavailableforencum-brance£m Otherassetscapableof beingencum-bered£m Cannotbeencum-bered£m
Cash and balanceswith central banks - - - - 2,468 3,487 - - 5,955 5,955
Due from other banks 156 282 337 775 - - 177 - 177 952
Investments -available for sale - - - - 101 1,594 36 - 1,731 1,731
Other financial assets - - - - - - 750 - 750 750
Derivatives - - - - - - - 585 585 585
Loans and advances tocustomers 1,149 5,144 - 6,293 2,902 3,946 13,003 3,058 22,909 29,202
Intangible Assets - - - - - - - 256 256 256
Deferred tax assets - - - - - - - 183 183 183
Other assets - - - - - - 122 193 315 315
───────────────────────────────────────────────────────────────────
Total Assets 1,305 5,426 337 7,068 5,471 9,027 14,088 4,275 32,861 39,929
═══════════════════════════════════════════════════════════════════
Other information
Glossary
For a glossary of terms and abbreviations used within this report refer to pages 291 to 296 of the Group annual report and
accounts for the year ended 30 September 2016.
For terms not previously included within the Glossary, or where terms have been redefined refer below:
Default A customer is in default when either they are more than 90 days past due on a credit obligation to the Group, or are considered unlikely to pay their credit obligations
in full without recourse to actions such as realisation of security (if held).
Indexed loan to value (LTV) of the mortgage portfolio The mortgage portfolio weighted by balance and indexed using the MIAC Acadametrics indices at a given date.
Net interest margin (NIM) Net interest income as a percentage of average interest earning assets for a given period. Net interest income of £411m (31 March 2016: £400m) is divided by average
interest earning assets for a given period of £36,963m (31 March 2016: £35,994m) (which is then adjusted to exclude short term repos used for liquidity management
purposes, amounts received under the Conduct Indemnity and not yet utilised, and any associated income). As a result of the exclusions noted above, average interest
earning assets used as the denominator have reduced by £643m (31 March 2016: £618m) and the net interest income numerator by £0.7m (31 March 2016: £1.3m).
Tangible net asset value (TNAV) per share Tangible equity as at the period end divided by the closing number of ordinary shares.
Term Funding Scheme (TFS) Launched in 2016 by the BoE to allow banks and building societies to borrow from the BoE at rates close to base rate. This is designed to increase lending to businesses
by lowering interest rates and increasing access to credit.
Underlying profit after tax attributable to ordinary equity holders Underlying profit before tax of £123m (31 March 2016: £107m) less tax charge of £29m (31 March 2016: £21m), less dividends and distributions (net of tax relief) of £15m
(31 March 2016: £23m) and was equal to £79m (31 March 2016: £63m). The underlying tax charge is calculated by applying the statutory tax rate for the relevant period to
the taxable items adjusted on the underlying basis.
Officers and professional advisers
Non-Executive Directors
Chairman Jim Pettigrew (1) (4)
Deputy Chairman and Senior Independent
Non-Executive Director David Bennett (1) (2) (3) (4)
Senior Independent Non-Executive Director Richard Gregory (resigned 10 January 2017)
Clive Adamson (2) (3)
David Browne (1) (2) (3)
Paul Coby (3)
Adrian Grace (1)
Fiona MacLeod (3) (4)
Dr Teresa Robson-Capps (2)
Tim Wade (2) (3)
Executive Directors David Duffy
Debbie Crosbie
Ian Smith
Company Secretary Lorna McMillan
Group General Counsel James Peirson
Independent auditors Ernst & Young LLP
1 Bridgewater Place
Water Lane
Leeds
LS11 5QR
(1) Member of the Remuneration Committee
(2) Member of the Audit Committee
(3) Member of the Risk Committee
(4) Member of the Governance and Nomination Committee
Forward looking statements
The information in this document may include forward looking statements, which are based on assumptions, expectations,
valuations, targets, estimates, forecasts and projections about future events. These can be identified by the use of words
such as 'expects', 'aims', 'targets', 'seeks', 'anticipates', 'plans', 'intends', 'prospects' 'outlooks', 'projects',
'believes', 'estimates', 'potential', 'possible', and similar words or phrases. These forward looking statements, as well
as those included in any other material discussed at any presentation, are subject to risks, uncertainties and assumptions
about the Group and its securities, investments and the environment in which it operates, including, among other things,
the development of its business and strategy, trends in its operating industry, changes to customer behaviours and
covenant, macroeconomic and/or geopolitical factors, changes to law and/or the policies and practices of the BoE, the FCA
and/or other regulatory bodies, inflation, deflation, interest rates, exchange rates, changes in the liquidity, asset
position and/or credit ratings of the Group, the repercussions of the UK's referendum vote to leave the European Union, and
future capital expenditures and acquisitions.
In light of these risks, uncertainties and assumptions, the events in the forward looking statements may not occur. Forward
looking statements involve inherent risks and uncertainties. Other events not taken into account may occur and may
significantly affect the analysis of the forward looking statements. Neither the Group nor its Directors give any assurance
that any such projections or estimates will be realised or that actual returns or other results will not be materially
lower than those set out in this document and/or discussed at any presentation. All forward looking statements should be
viewed as hypothetical. No representation or warranty is made that any forward looking statement will come to pass. No
member of the Group or its Directors undertakes any obligation to update or revise any such forward looking statement
following the publication of this document nor accepts any responsibility, liability or duty of care whatsoever for
(whether in contract, tort or otherwise) or makes any representation or warranty, express or implied, as to the truth,
fullness, fairness, merchantability, accuracy, sufficiency or completeness of, the information in this document.
The information, statements and opinions contained in this document do not constitute a public offer under any applicable
legislation or an offer to sell or solicitation of any offer to buy any securities or financial instruments or any advice
or recommendation with respect to such securities or other financial instruments.
CYBG PLC
Registered number 09595911 (England and Wales)
ARBN 609 948 281 (Australia)
Head Office: London Office: Registered Office:
30 St. Vincent Place Floor 15, The Leadenhall Building 20 Merrion Way
Glasgow 122 Leadenhall Street Leeds
G1 2HL London West Yorkshire
EC3V 4AB LS2 8NZ
www.cybg.com
This information is provided by RNS
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