Clydesdale Bank owner CYBG Plc (CYBGC.L), which also runs Yorkshire Bank, said on Tuesday it was hit by one-off restructuring costs in the first half of the year, knocking its profit and sending its shares 4.5 percent lower.
Although its statutory profit fell to 46 million pounds once one-off costs and charges were included, compared to 58 million a year ago, the British bank said cost controls and new investments meant it would still meet full-year targets.
But while a slight drop in CYBG's core capital levels and the rate of return in its mortgage business worried some analysts, Chief Executive David Duffy said the bank had a strong pipeline in both business and mortgage lending.
CYBG's common equity tier 1 ratio (CET 1) - a key measure of a lender's ability to absorb losses - fell to 12.5 percent from 12.6 percent at the end the first quarter. Underlying return on tangible equity stood at 6.3 percent.
CYBG said it had applied to the Bank of England to switch to an internal method of estimating its capital requirements, which it said should boost cash if approved.
And because Glasgow-based CYBG was "not aggressive" in its growth ambitions, this would protect it if the UK economy slowed, Duffy said.
The CEO declined to comment on whether CYBG was interested in buying Co-op Bank (42RQ.L) or its assets, adding that it did not need to do acquisitions to deliver its forecast of double-digit returns in financial year 2019.
Although CYBG has been cutting branches as it tries to move more business online, Duffy said it would look at opportunities to buy physical assets "without any prejudice".
Co-op bank, which has 4 million customers, is seeking a buyer after struggling to meet capital requirements.
(Editing by Sunil Nair/Rachel Armstrong/; Alexander Smith)