Stocks’ Details

CYBG PLC

Share Combination with Virgin Money Holdings (UK) PLC:CYBG PLC’s (ASX: CYB) stock rose 5% on May 09, 2018 after the company made a preliminary approach for share combination of CYBG with those of Virgin Money Holdings (UK) PLC. As per this proposal, CYB will acquire all the issued and to be issued share capital of Virgin Money on the basis of an exchange ratio of 1.1297 new CYB shares for each Virgin Money share. This is approximately $3 billion bid for Virgin Money Holdings (UK) PLC. Further as per the proposal, Virgin Money would own around 36.5% of the combined group. Moreover, CYB expects that this takeover would create the UK’s leading challenger bank and would provide full service banking offer for 6 million personal and business customers. Quite recently, the Board of CYBG flagged for increasing its provisions for legacy PPI costs as at 31 March 2018 by £350 million, with the provision amount subject to the finalisation of the Group’s half year results for the six months ended 31 March 2018. Meanwhile, CYB stock has fallen 0.54% in three months as on May 08, 2018 and is trading at a high level. As of now, we give an “Expensive” recommendation on the stock at the current price of $ 5.790.
 

Commonwealth Bank of Australia

Fall in profits in the third quarter 2018:Commonwealth Bank of Australia’s (ASX: CBA) stock fell 2.8% on May 09, 2018 after the company for the third quarter has posted 9% fall in the underlying Cash NPAT compared to 1H 18 quarterly average. For the third quarter 2018, the company has delivered unaudited statutory net profit of approximately $2.30bn and the unaudited cash net profit of approximately $2.35bn. The underlying operating income fell by 4%, driven by two fewer days in the quarter, and lower other banking income. Excluding the impact of two fewer days in the quarter (approximately $100m), the net interest income was flat. The volume growth was offset by a slight decline in Group Net Interest Margin due to customer switching from interest only to principal and interest home loans, as well as higher basis risk. Other banking income is lower due to lower treasury and trading performance, and seasonally lower card fee income. The underlying operating expense rose by 3%, due to an increased provisions for regulatory and compliance project spend. The bank has sound credit quality, with Loan Impairment Expense (LIE) of $261m in the third quarter or 14 bpts of GLAA. On the other hand, CBA agreed in-principle settlement with the Australian Securities and Investments Commission (ASIC) to settle the legal proceedings in relation to claims of manipulation of the Bank Bill Swap Rate (BBSW). CBA has agreed to pay a $5 million penalty, which is a payment of $15 million to a financial consumer protection fund and a $5 million payment towards ASIC's costs of the litigation and its investigation. The impact of this settlement will be reflected in CBA’s FY 18 results. However, this is subject to Federal Court approval of the settlement. Further, CBA has also agreed to enter into an enforceable undertaking with ASIC, under which an independent expert will be appointed to review controls, policies, training and monitoring in relation to its BBSW business. CBA and ASIC will make an application to the Federal Court for approval of the settlement. Meanwhile, CBA stock has fallen 3.93% in three months as on May 08, 2018 and looks “Expensive” at the current price of $ 71.410, in view of the above and challenges from Royal Commission.
 

Third Quarter 2018 Financial Performance (Source: Company Reports)

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