Clydesdale and Yorkshire Bank's lending growth defies Brexit gloom

* Lending rises marginally to 71.9 bln stg

* Sees (Shanghai: 600481.SS - news) 2019 net interest margin at upper end of guidance

* No surprise on PPI mis-selling charges

* Shares (Berlin: DI6.BE - news) on track for best day ever (Adds details, shares, analyst comments)

By Noor Zainab Hussain and Muvija M

Feb 6 (Reuters) - Shares in Clydesdale and Yorkshire Bank owner CYBG Plc (Frankfurt: 42YA.F - news) surged 14 percent on Wednesday after the British lender lifted its forecast for margin growth and reported a rise in lending in a tight UK mortgage market.

The 1.4 percent increase in total loans in October-December, the first quarter of the bank's fiscal year, surprised investors as CYBG had warned in November that Brexit-related concerns were subduing the short-term prospects for homeowners and small businesses who are its main customers.

The bank again flagged uncertainties around Britain's impending departure from the European Union, but said it was working hard to alleviate pressures on customers.

Its shares, which had fallen 28 percent since its warning in November, were up 14 percent at 204 pence by 1000 GMT.

The first quarter results showed no further charges for PPI mis-selling and the bank also increased its estimate for cost savings as a result of its acquisition of rival Virgin Money last year, which made it the sixth biggest retail bank in the UK.

"Refreshed NIM (net interest margin) guidance and strong loan growth, driven by mortgages, should be taken well, as should the updated cost synergy target from the VM deal," Investec (LSE: INVP.L - news) analyst Ian Gordon said.

Total (LSE: 524773.L - news) lending grew 1.4 percent to 71.9 billion pounds ($93 billion) in October-December, slowing from earlier last year but still holding up in difficult conditions.

The bank also forecast a 2019 net interest margin - the difference between what it earns from loans and pays for deposits - at 165-170 basis points, at the upper end of its previous guidance.

Banks' margins have been constrained by sustained pricing pressure in a UK mortgage market where competition is high and growth, in part due to the uncertainties of Brexit, hard to come by.

British banks approved fewer mortgages in December than in November and the value of lending for home purchases rose by the smallest amount since 2016.

The loan numbers put CYBG shares on course for their best-ever day and offered some respite to those in rival Metro (Amsterdam: ME6.AS - news) Bank, which has been pummelled after announcing a sharp rise in its exposure to higher-risk mortgages.

"It is positive to see (CYBG) lift its FY19 NIM guidance range, which should do a little bit to reassure following the overreaction to the downgrade (in NIM forecasts) last November," Goodbody analyst John Cronin said.

($1 = 0.7729 pounds)

(Reporting by Muvija M and Noor Zainab Hussain in Bengaluru Editing by Susan Fenton)