Comment: Clydesdale future contingent on events

NATIONAL Australia Bank’s declaration that it has contingency planning in place for its Clydesdale Bank business if there is a Yes vote in the Scottish independence referendum may be taken with a pinch of salt by many observers.

Martin Flanagan

Some would argue that NAB’s strategy for Clydesdale in recent years has been one large contingency plan on whether they could find a buyer for it and its sister UK operation, Yorkshire Bank.

Volatile earnings, bad debts following commercial lending over-reach, credit rating worries and less than full-blooded assertions of support for Clydesdale from its Australian parent have all combined to produce chronic speculation that the Scottish bank was more likely to be a target of UK banking industry consolidation than an initiator.

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Recently Clydesdale has again been in retrenchment and cost-saving mode. But the point semaphored by new NAB boss Andrew Thorburn may be that a vote for Scottish independence might mean the subsidiary faced swimming against the tide because its costs and risks would rise significantly.

In saying there is contingency planning for such a vote, NAB is following the standard line of the other financial institutions with big Scottish operations, notably Lloyds, Royal Bank of Scotland and Standard Life.

However, as the relevant chief executives (with the exception of David Nish at Standard) have not elaborated on what the tangible possibilities are, contingency planning does nothing to add to the sum of human knowledge.

Clydesdale and Yorkshire banks’ problems on legacy issues also show little sign of being consigned to history.

Thorburn said in the third-quarter trading update to June that an extra £170 million provision is expected to be taken by NAB UK for mis-selling interest rate hedging products to small businesses, and an additional £75m hit on payment protection insurance (PPI). It takes the total British provisions for NAB on these issues to more than £800m. Quite apart from the referendum result north of the Border, Clydesdale and Yorkshire look set to remain in the twilight zone as far as its parent group’s commitment to it is concerned for some time yet.

Housing prices slide to just pretty warm

IT IS still nascent rather than a thoroughgoing correction, and we are coming from vertiginous heights, but there are more signs that a cooling of the housing market is under way.

Asking prices for houses in the UK in the traditionally quiet month of August UK fell 2.9 per cent from July, taking the annual rate of price growth to 5.3 per cent from 6.5 per cent a month earlier, says property website Rightmove.

Although a sharp decline in London – also known as Moscow central from the amount of rich expatriate Russians inflating the market – was a significant factor, the trend looks more widespread than that.

Nationwide building society revealed its gross mortgage lending dropped 9 per cent in its first trading quarter to end-June.

Even so, we should not get carried away. We are seeing a housing market that looks as if it is no longer heating up – possibly through recent Bank of England measures on greater customer scrutiny – rather than one cooling sharply.

And the underlying dynamic that has driven up house prices – lack of supply – has not changed at all.