Ann: CYBG PLC Third Quarter 2019 Trading Update, page-142

For each $1 of CYB stock purchased, one will "receive" $2.77 (1/0.36) of underlying tangible (excluding minority interests etc) equity ownership, currently returning 10% p.a, with the potential to return 12% p.a within a few years?

@Jausty1919

That is exactly how I’m looking at it, with the only caveat that the 10% yield is pre-tax, and that its preservation/growth over time is subject to a variety of business/execution risks.

Is anyone aware of any intelligent analysis or viewpoints demonstrating any legitimate current risk exposure to significant and permanent loss of equity?

From what I can see (not sure how intelligent/unintelligent my viewpoint is), permanent loss of equity could be caused by:

a) PPI settlements. Don't know how to exactly quantify that risk, but, as @vagabond84 has pointed out, Lloyds have provisioned 550m GBP against it. So, looking at the relative size of CYBG, the corresponding amount is unlikely to be dramatic in the context of 5.4bn GBP in Net Assets.

b) Settlement of claims over “complex business loans” between 2001 and 2012. Similar to the above; this is going to be disputed in the High Court, and the potential size is claimed to be “in the hundreds of millions” by the claims firm who’s suing. Again, hard to quantify, but unlikely to be crippling, from what I can see.

c) Well… Brexit. I agree that a risk analysis of CYBG should not entirely gravitate around this point, but a severe recession in the UK would certainly see a rise in bad loans and credit defaults, which would be conducive to permanent loss of equity for CYBG.

This list is no doubt far from exhaustive, let me know if you can see any additional risk factors that I’ve missed.