Here’s the summary of CS’s note published today: « We downgrade Virgin Money (VM) to Neutral and reduce our 2018/19E EPS by 6%/22% respectively, after reviewing its business and recently announced digital bank/SME strategy. Our new TP of 305p (previously 330p) implies a valuation of 1.0x 18E TNAV. We prefer OneSavings (OP, TP 460p) and Clydesdale (OP, TP AUD6.00) in terms of the fundamental theses, and relative valuations look reasonable vs VM. »
Broker mentions that it is « cautious on margin outlook » for the company.
« We think there are constraints on deposit and mortgage pricing, and we expect a neutral mix benefit from credit cards (vs c10bps/4bps in FY16/17). Our 18/19E earnings changes reflect weaker margins and growth and, for 19E, £35m higher costs associated with the digital bank », they add in the report.