Ann: Preliminary Announcement of Annual Results 2018, page-29

"What are your thoughts around the pro forma CET1 ratio of ~16%? It seems reasonable to me.
Some analysis have pointed out that this is lower than peers who are better capitalised. Cheers!"

@zhanginu,

I'm not sure where you obtained that pro forma 16% CET1 figure you referenced?

CYB's current CET1, pre-Virgin Money acquisition, was around 10.5% [*], while Virgin Money's CET1 was around 14.0% in FY2017 (based on VM's last reported figures before being acquired), so by my reckoning, CYB's CET1 - immediately upon the acquisition of VM - will have been running at around 12.5% to 13%, with some subsequent capital management optimisation having the potential to deliver an extra 100bp or 150bp within the first year of VM ownership.

So, CYB+VM is currently sitting at a CET1 ratio of around 14%, by my rough estimations.

Which I sense is adequate, and in the middle of the pack of global banks.


[*] At 10.5%, the level that analysts might have been suggesting was below peer average, that I think is too skinny and an inadequate capital buffer given the short-term challenges that are currently facing the UK economy. This was one of the reason I sold my CYB shares when I did: besides what I thought was a full valuation at the time, I was concerned that the company might need to raise capital. As it happens, I view the Virgin Money acquisition, being a scrip only transaction, and buying a better-capitalised entity, as a sort of de facto capital raising; but one that has some earnings accretion associated with it (so kudos to management for enhancing the capital adequacy of the company without any earnings dilution... albeit with some execution risk.)