Impatient Investec downgrades CYBG

15 April 2019

(Sharecast News) - CYBG shares still look cheap for the patient investors but Investec downgraded its recommendation as it sees little "better value elsewhere" on a 12-month view.
With shares in the FTSE 250 group having rallied strongly since late December, Investec cut the challenger bank to 'hold' from 'buy' and set a new target price of 230p.

Following the merger between the Clydesdale Bank and Yorkshire Bank owner with Virgin Money, full synergies are not expected until the 2022 financial year, though Investec's analysts forecast progress with some aspects will be relatively slow, while there will be continued pressure on net interest margin.

While CYBG missed out on initial awards from the RBS alternative remedies scheme, it has applied under the second round and could also make use of the incentivised switching scheme, which will have £350m of money from RBS to help redistribute SME customers around to challenger banks.

"For CYBG, there is a clear opportunity to secure new liability-rich customer relationships, accelerate growth and rebalance the group away from mortgages," the analysts said, with interim results in mid-May and a capital markets day in June

"For the patient investor, we think CYBG offers further upside potential, but after a 26% return since 27 December, on a 12-month view, we see better value elsewhere."

Investec's preferred name in the banking space is Charter Court, where it retains a 'buy' rating.