Challenger Bank cuts cloth to deal with market slowdown

Shares in challenger bank CYBG dropped 4% today after it said it would cut costs further to cope with a slower UK economy.

The shares dropped 11p to 261p but remain above the 180p at which the owner of Clydesdale and Yorkshire banks was spun off from National Australia Bank seven months ago.

The bank said it would spend £200 million, saving an extra £100 million of costs per year by 2019.

Finance director Ian Smith said these would come through a combination of “better efficiency, people and better use of properties”.

Chief executive David Duffy said: “We will invest more than £350 million over the next two years to simplify our business, drive cost and capital efficiency, maintain our platform’s resilience and support the continued roll-out of our omni-channel model.”

CYBG said it was planning on the basis of interest rates at zero, GDP growth of 1% to 2% and house price inflation of 0.5% to 2% for the next three years.

It predicted a double-digit return on equity by the end of 2019, costs down to 55%-58% of income and “mid-single-digit” growth in loans.

Its dividend policy is unchanged, eventually rising to 50% of earnings per share.