Strong showing by Yorkshire Bank despite global banking crisis
YORKSHIRE Bank has helped boost its parent company’s fortunes against a backdrop of slowing credit growth and a weakening economy.
National Australia Bank (NAB), which also owns Clydesdale Bank, said today that its British business had continued to deliver a “strong trading performance relative to local peers” in what it described as a “challenging market”.
Cash earnings were up 2.5% for the year ended September 2008 with underlying profits up 11.9% to £518m.
NAB said that despite a difficult market the UK region had maintained momentum in quality lending and deposit gathering and that the banks were “differentiated” by their adherence to sound banking principles, firm cost control and ongoing business efficiency improvements.
However, it admitted that some key asset quality measures had softened since March although more favourably than rivals.
Areas performing well include Yorkshire and Clydesdale’s retail portfolio with the value of accounts 90 days past due in housing and unsecured lending remaining broadly stable.
The level of mortgages three months in arrears is less than half the UK industry average.
“The UK region remain resolutely focussed on the prudent development of its operations and is well positioined to capture business in the aftermath of current consolidation activity within the UK banking sector,” NAB added.
The Australian-based bank’s overall performance has also bucked the sector’s trend, although its strong performance was marred by a $1bn (£400.8m) loss as a result of provisions required against conduit assets in its NAB Capital securitisation business.
It said the write-down in these assets was a direct result of the severe and escalating distress of the US housing market experienced throughout 2008.
But the bank remains defiant adding that the write off is “considerably less” than those made by many of its peers.
It said it has undertaken a thorough review of its loan portfolio in the remaining quarter with a focus on higher risk areas .
The review concluded that the portfolio is performing well and the group is appropriately provisioned and the lending portfolio is well diversified, both geographically and by product.
“The strength of the group’s underlying profit growth allowed this loss to be absorbed and still deliver cash earnings of $3.6bn (£1.4bn) – down 10.7% on the prior year,” it said.
Underlying profit for the bank was $8.1bn (£3.2bn) – an increase of 13.9%. Cash earnings Revenue rose by 5.8% to $15.4bn (£6.6bn). Pre-tax profit was maintained at £343m.
Its Australian operation continued to perform well with strong revenue growth and a cost to income ration of 40.6% for the banking operation in the second half.
NAB’s New Zealand business has also produced strong results recording its seventh consecutive half year of flat costs and earnings growth.
And despite having the greatest exposure to global market conditions NAB Capital delivered a 36% like-for-like increase in underlying profit.
This was driven by an “exceptional performance” across the global markets division. According to NAB, its lending business also benefited from growth in corporate finance and repricing initiatives in institutional banking.
John Stewart, NAB’s chief executive officer said: “In an extremely difficult environment, each of the Group’s businesses delivered strong underlying results. This reflects the continued strength of our franchises, effective cost disciplines, and pro-active credit management.
“Our traditional branch banking and wealth management operations are all profitable, well capitalised and conservatively funded.
“Overall, and individually, our banking businesses have sound asset quality and are well provisioned. While this is the norm for the Australian banking industry, it is in stark contrast to the situation of many banks around the world.”
