Clydesdale reports bad debts rising with profits

Published on Monday 7 February 2011 21:32

BAD debts climbed at the Clydesdale and Yorkshire banks as the UK's economic recovery ran out of steam in the final three months of 2010.

Parent company National Australia Bank (NAB) said yesterday that despite the UK business's "resilience", the ratio of bad or doubtful loans deteriorated to 3.34 per cent at the end of December. That compared with 3.15 per cent three months earlier.

Demand for credit had also been subdued, but in a trading update NAB said it was on track to deliver its two-year pledge to advance 10 billion of gross new lending to businesses and mortgage customers by October.

The group said the British economic outlook remained weak with a slow recovery expected as the government's austerity measures kicked in.

Yesterday's update covered the first quarter of the company's financial year, when UK economic output contracted 0.5 per cent due to the weather and low consumer confidence, raising fears of a double-dip recession.

Lynne Peacock, chief executive of the UK operations, said: "Against a background of economic uncertainty, our UK business continues to demonstrate its resilience and our prudent strategic direction is unchanged."

Clydesdale Bank and Yorkshire Bank, which together have about 400 branches and 8,355 staff, posted profits up 53 per cent to 164 million in its most recent financial year after an 18 per cent falls in bad debt charges.

NAB, which bought Clydesdale in 1987, has been the subject of deal speculation over the last year after it was unsuccessful in the auction of 318 branches put up for sale by Royal Bank of Scotland, a deal later secured by Spanish giant Santander. The wider NAB business yesterday reported an 18 per cent rise in Q1 earnings to A$1.3 billion (817m).