Yorkshire Bank to exit commercial property market

TWO of the UK’s most active banks have shut their doors to new commercial property lending, in a dramatic turnaround that highlights the liquidity crisis facing the sector, according to PropertyWeek.com.

National Australia Bank-owned Clydesdale and Yorkshire banks have both closed down for new commercial property lending.

The decision is likely to be accompanied by a sale of parts of Clydesdale’s legacy loan portfolio.

However, a Yorkshire Bank spokesman said the move did not affect residential mortgage lending.

It is understood that National Australia Bank is weighing the disposal of a £300m property portfolio, which includes residential developments.

The banks’ exit will be a blow to the already debt-starved regional property markets, where they were among only a handful of banks active.

Clydesdale and Yorkshire’s exit shows how even established lenders to the industry are withdrawing from the sector because of market volatility and increasingly regulatory pressure on property lending. Eurohypo and Société Générale last year closed their doors to property lending indefinitely.

The measures also highlight the way in which foreign-owned banks are reviewing their involvement in the UK property market. National Australia Bank is thought to have held talks about selling Clydesdale and Yorkshire’s entire operations to NBNK, the new banking group set up by former Lloyd’s of London chairman Lord Levene.

Clydesdale and Yorkshire will continue to work with existing customers on what it described as the “downward management” of its property book.

A spokeswoman for Clydesdale said: “Although our new lending to all businesses increased by more than £7bn in the past two years, we have been clear for some time about our reduced appetite for new commercial property lending and have sensibly introduced tighter controls.

“Many commercial property businesses have elected not to extend their borrowing during the protracted economic uncertainty but we continue to provide support for existing customers.”

Meanwhile, Yorkshire Bank’s balance sheet has been strengthened after its parent National Australia Bank revealed it intends to increase Clydesdale Bank’s capital by £400m.

NAB said Clydesdale Bank’s Tier 1 capital ratio will be raised by 1.4% on a pro forma basis by the capital increase.