Clydesdale and Yorkshire Banking Group (LON: CYBG) have swung into the red following large fines for payment protection complaints.

CYBG posted a loss of £95 million from last year’s profit of £46 million after putting aside £350 million for misselling PPI.

The FTSE 250 lender has estimated that 110,000 of its customers will complain in the run-up to the August 2019 deadline. City regulators are planning to step up a campaign to ensure customers who are eligible will complain and receive compensation.

The bank is currently in talks with Virgin Money (LON: VM) for a potential £1.6 billion takeover.

The approach was revealed last week, where CYGB plan to give investors 1.13 of its shares for each Virgin Money share. This will give them a 36.5 percent share of the total group.

In a bid to win approval from Virgin Money, CYBG will continue the Virgin Money brand. The lender has until June 4 to formally propose or withdraw its proposal.

Despite the poor results, City analysts believe a takeover of Virgin Money will make strategic sense.

“The absence of inorganic growth” for CYBG means that a deal with Virgin Money looked sensible for the bank and shows “management confidence”.

The group’s chief executive David Duffy said: “While the economic outlook remains uncertain, CYBG is well-positioned to continue executing our existing strategy and to capture future growth opportunities.”