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Notes on preparation & Glossary
Notes on preparation
In the interactive dashboard, the banks are classified as follows:
Retail full service: CYBG plc (Clydesdale Bank Plc prior to 2015), The Co-operative Bank Holdings Ltd (The Co-operative Bank plc prior to 2016), Bank of Ireland (UK) plc, Svenska Handelsbanken AB (publ) (UK division), Metro Bank plc, TSB Banking Group plc, Virgin Money Holdings plc.
Retailer: Tesco Personal Finance Group Ltd, Marks and Spencer Financial Services plc, Sainsbury's Bank plc.
Specialist - mixed: AIB Group (UK) plc, Aldermore Group plc, Cynergy Bank Ltd (Bank of Cyprus UK Ltd prior to 2018), Close Brothers Group plc, Provident Financial plc, Secure Trust Bank plc, Shawbrook Group plc, Unity Trust Bank plc.
Specialist – mortgages: Cambridge & Counties Bank Ltd, Charter Court Financial Services Group plc (Charter Court Financial Services Group Ltd prior to 2017), Hoggant Limited (holding company for Hampshire Trust) for 2015-17 and Hampshire Trust plc for 2014/13, OneSavings Bank plc, Paragon Banking Group plc (Paragon Banking Group plc prior to 2017), United Trust Bank Ltd.
CYBG has a September year end, and as a result the 2018 financial statements do not include the impact of the acquisition of Virgin Money. Virgin Money's financial results are separately presented within the dashboard.
The dashboard focusses on UK challenger banks with an established trading record over the 2014-2018 period. As a result, the dashboard does not include the results of many of the new 'digital' challengers that have shorter trading records.
Within the 'Specialist' category, banks have been classified as 'Specialist – mortgages' where their lending books are predominantly secured on property. These books may include owner occupied residential mortgages, buy-to-let residential mortgages and SME lending secured on property.
Information has been obtained from published annual financial statements. No adjustments have been made for one-off/non-recurring items. Loans and advances to customers are presented inclusive of fair value adjustments for hedged risk.
We have taken the following approach to calculate each of the key performance indicators used in this report. These key performance indicators use the reported results. Given that there are no standard definitions for these items, they may differ to the KPIs reported by the banks in their published financial statements.
Pre-tax return on tangible equity: profit before tax attributable to the shareholders, divided by the average of opening and closing tangible equity.
Gross yield: the gross yield is calculated as interest income divided by the average of the opening and closing total assets.
Cost of funding: cost of funding is calculated as total interest expense divided by the average of opening and closing total liabilities.
Net interest margin (NIM): the NIM is calculated as total net interest income divided by the average of the total assets.
Cost-to-income ratio: the CTI ratio for each sub-division of Challengers is calculated as total operating expenses divided by total operating income. Separately disclosed costs relating to stock exchange listings are excluded from total operating expenses.
Cost of risk: Impairment charge on loans and advances to customers divided by the average of opening and closing loans and advances to customers.
RWA intensity: RWA intensity is calculated as risk weighted assets divided by total assets.
Loan:deposit: Loans and advances to customers divided by customer deposits.
Peer group averages are calculated as a simple average of the banks within the peer group. The following banks have been excluded from calculation of peer group averages either because information is not available or that the institution is an outlier:
Pre-tax return on tangible equity: Co-operative bank, Handelsbanken and Provident.
Loan book growth rate: Handelsbanken, Hampshire Trust, Charter Court (2014-16).