(Reuters) - British lender CYBG Plc <CYBGC.L> posted a 13 percent rise in underlying pretax profit for the year on Tuesday and said it had started contingency planning due to uncertainties from the country's exit from the European Union.
Banks have become more concerned after a draft Brexit agreement was signed last week, giving the country's banks, insurers and asset managers limited access to European financial markets after a transition period that starts in March and is set to end in December 2020.
The Clydesdale and Yorkshire Bank owner's shares, along with bigger rivals, lost ground last week when several British ministers, including Brexit minister Dominic Raab, resigned after Prime Minister Theresa May unveiled her draft European Union divorce deal.
"Clearly Brexit negotiations mean the external political and macro economic environment remains inherently uncertain... it is impossible to ignore the lower levels of business confidence, especially for SMEs, while the final specific outcome of negotiations remains unclear," David Duffy, CYBG's chief executive officer, said.
CYBG also said it had begun planning for a disorderly Brexit.
"Political uncertainty related to Brexit continues to cast a shadow over the UK's short term economic prospects," CYBG said.
Adding to the woes for smaller banks are factors including a heavily competitive mortgage market, house prices recording their steepest fall in more than six years and higher costs from a changing regulatory landscape, especially in mortgage lending.
CYBG said the short-term outlook for its key lending markets, UK homeowners and SMEs, is more subdued than in recent years.
CYBG said its loan book grew to 28.85 billion pounds at fiscal year-end, from 27.68 billion pounds.
The company said underlying pretax profit rose to 331 million pounds, for the 12 months ended Sept. 30, from 293 million reported last year.
(Reporting by Muvija M and Noor Zainab Hussain in Bengaluru; Editing by Bernard Orr)