Yorkshire Bank owner remains positive

YORKSHIRE Bank owner National Australia Bank (NAB) believes that its British subsidiaries remain “well positioned” to benefit from any improvement in operating conditions.

But NAB – which also owns the Clydesdale – also said that its income in the UK remained under pressure in the three months to the end of last December as a result of the economic difficulties.

Its quarterly trading update revealed that is also continuing to monitor the UK market closely and the situation remains tough despite early signs of recovery.

But the Clydesdale and Yorkshire banks are also finding that competition for deposits in the UK is remaining strong.

The update states: “Cash earnings benefited from a lower bad and doubtful debt charge, albeit still above historical levels, and easing of funding costs.

“Underlying net interest income continued to improve during the quarter as basis risk moderated and front book margins strengthened across key personal and business products.” 

The update also reported a slight improvement in the levels of bad debt resulting from the UK commercial property market.

NAB’s unaudited cash earnings for the period were £1.1bn which represented a 20% increase on the previous year.

The bank attributed this improvement to a decline in the charge for bad and doubtful debts as well as its “sound business performance”.

NAB’s total group revenue was also “broadly stable” compared to the second half of 2009 which was largely due to higher wholesale funding costs and heightened competition for deposits.

It also saw its income from markets trading settle back towards 2008 financial year levels from the “exceptional levels of 2009” as market uncertainty reduced.

Commenting on the bank’s overall performance,  chief executive Cameron Clyne said: “”Our businesses delivered a sound result in the December quarter. 

“This was achieved despite subdued credit growth, heightened competitive pressures and a continued upward trend in average funding costs.

“Bad and doubtful debt charges have fallen and are not expected to return to the peak experienced in the third quarter of the 2009 financial year. 
“However, given the fragile global recovery and uncertain regulatory environment, a conservative approach to capital and liquidity management remains appropriate.

“We continued to invest in business banking and wealth management in Australia through a combination of organic and inorganic initiatives. 

“One important part of this, the integration of Aviva, is progressing well and exceeding our expectations.

“Our United Kingdom franchise remains well positioned to benefit from any improvement in operating conditions. 

“We will continue to monitor market developments in the UK.”