NAB says Clydesdale earnings are on the mend

By GARETH MACKIE
Published on 07/02/2013 19:37

Clydesdale Bank’s Australian parent company has reported “pleasing” progress in the restructuring of its UK arm, which slumped to its first annual loss last year.

Under pressure to improve shareholder returns, National Australia Bank (NAB) last year embarked on a shake-up at Clydesdale that will see 1,400 jobs axed by September 2015.

NAB chief executive Cameron Clyne revealed yesterday that the group’s headcount had shrunk by about 500 during the first quarter of the year, largely as a result of UK restructuring.

Clydesdale is also pulling out of the commercial real

estate market, transferring a

£5.3 billion loan book to its

parent group for run-off, along with up to 200 employees. In

addition, it has shut down 29 business banking centres and relocated nine others, mainly across the south of England, to focus on its strongholds of

Scotland and Yorkshire.

Overall, the Australian firm said profits for the three months to 31 December rose 4 per cent to about A$1.45bn (£956 million), as higher revenues and lower bad debts offset a 4 per cent increase in costs.

Clyne, who took on the role of executive chairman at Clydesdale in July following the retirement of previous chair Sir Malcolm Williamson, said: “NAB delivered a stronger result for the quarter, reflecting the underlying strength of our core

Australian business and

improved earnings in the UK.

“This is a pleasing result,

especially given operating conditions remain challenging both in Australia and the UK, notwithstanding recent improvements in financial markets.”

First-quarter lending volumes at Clydesdale – which also owns Yorkshire Bank – were said to be “broadly stable” as an increase in mortgage demand offset a decrease in lending to business.

According to figures released by the Bank of England in December, the bank’s net lending to households and businesses shrank by £23m during the three months to 30 September.

Analysts at Credit Suisse claimed last month that NAB could boost its market value by up to A$4.5bn by spinning off Clydesdale as a separately listed entity. Santander was also rumoured to be mulling a £2bn bid for the business, but this was denied by the Spanish group.

Figures published in October showed that the Glasgow-based lender, headed by chief executive David Thorburn, slumped to a pre-tax loss of £183m in the year to September after it was hit by a sharp increase in bad debts.

Clyne has previously ruled out a “fire sale” of NAB’s UK business in an effort to avoid shareholder losses, but has acknowledged that it will be some time before the division is able to generate “acceptable returns”.

A further update on NAB’s medium-term strategy is due next month, when Clyne is expected to give more details on a push to reduce costs by encouraging more customers to bank over the internet.

He said: “In this environment, cost management continues to be a key priority but we remain mindful of the need to balance this objective against the importance of continued investment. On this front, our technology transformation project continues to make good progress.”