Clydesdale owner pledges £1bn more UK lending despite rising bad debts

Published on Wednesday 22 July 2009 21:35

THE owner of Clydesdale and Yorkshire banks promised a further £1 billion in new lending yesterday despite a continued rise in charges for bad debts in the economic downturn.

It came as parent company National Australia Bank (NAB) launched a A$2 billion (994 million) fundraising to "maintain balance sheet strength and flexibility".

Lynne Peacock, chief executive of NAB's UK business, said in a third-quarter trading update: "Our commitment to supporting customers in these unprecedented market conditions remains a key and enduring focus for Clydesdale and Yorkshire banks.

"We have remained open for business throughout the market upheaval. Having already advanced almost 3bn of new lending to business and mortgage customers in the past nine months, we are now pledging to make a further 1bn of new lending available – at a time when customers need it most." A total of 1bn of gross new lending was advanced in the latest quarter.

NAB said its UK arm had seen a deterioration in the quality of its assets, particularly in its business portfolio, "reflecting the contraction in the UK economy". The bank has some 2.6 million customers in the UK through Glasgow-based Clydesdale Bank, which incorporates the Yorkshire Bank brand.

Peacock said the UK operation was able to pledge substantial further lending partly because "the strength of our capital position and improved funding from continued strong deposit growth".

Clydesdale and Yorkshire banks said that, despite "intense sector competition", the UK division saw average retail deposits grow 4 per cent in the quarter to 30 June.

Peacock said that, although the banks were "not immune from historically high funding costs and increased bad and doubtful debts", they had achieved strong revenue growth in the latest quarter.

Charges for bad and doubtful debts at the Australian parent company rose to A$1.06bn (529m) in the quarter, including individual exposures and a further deterioration in its customers' credit quality across all its businesses. No figures were provided for the UK division.

Last year NAB posted full-year pre-tax profits of 343m for its UK arm, down 0.3 per cent on the previous year. At the time it said bad debts had grown from 119m to 175m and mortgages 90 days or more in arrears rose from 0.44 per cent to 0.51 per cent. Yesterday, Clydesdale and Yorkshire banks said the rate of mortgages past the 90-day mark had risen from 0.75 per cent to 0.93 per cent in the quarter. But it said this was less than half the industry average and represented "a continued strong performance".

NAB said its capital-raising would provide firepower for expansion and help beef-up its balance sheet.