Clydesdale’s owner ‘faces £640m restructuring bill’

National Australia Bank (NAB) could face costs of up to £640 million to restructure its Clydesdale and Yorkshire banks business in the UK and write off bad debts, analysts have warned.

The group’s chief executive, Cameron Clyne, is due to announce the findings of a major review of its UK operations by 10 May and speculation over its outcome is mounting in Australia.

The latest research note by analysts at UBS said NAB may have to swallow a heavy charge on the UK business including the cost of restructuring and increased provisions to cover for a run-up in bad debts.

Analyst Jonathan Mott predicted the UK review “will lead to additional provisions both for bad debts – commercial property valuations – and restructuring. This may be in the range of £320m to £640m in our view”.

Mott also predicted that NAB would shut down its network of “financial solutions centres” in the south of England as part of its UK restructure and focus its attentions on its branch network in Scotland and the north of England. The centres have been responsible for a significant proportion of the bank’s lending to the hard-hit commercial property sector.

Last month, a report by analysts at Citi also warned said NAB may have to write down up to £500m from the value of its UK commercial property book to clear the way for any sale of the banking operations.

It argued a write-down would be needed given commercial property values have fallen 35 per cent since 2007 with speculation of a further drop by the end of 2013.

Citi believes a full exit for NAB from the UK is feasible by 2014, which would release some £2.5 billion in capital. The review of NAB’s UK operations has been prompted by dwindling returns blamed on poor performance of the economy and high regulatory costs.