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Strategic review will lead to job losses at Yorkshire Bank
YORKSHIRE BANK is to undergo a strategic review that will result in “inevitable” job losses and a change in strategy.
Yorkshire and sister bank Clydesdale, which are owned by National Australia Bank, will announce the outcome of the review in May.
Yorkshire Bank’s chief executive David Thorburn said that everything is under review as the bank strives to cope with deteriorating economic conditions, a challenging outlook and an increase in bad debts.
“The review is about improving returns to provide a strong and sustainable future for the business,” he said.
“We need to change the shape of the business. Returns have suffered and that’s not acceptable to me or to shareholders.”
It is not clear yet how many jobs will be axed from Yorkshire and sister bank Clydesdale’s 8,300 employees, of whom 2,000 are employed in Yorkshire.
When asked about redundancies, Mr Thorburn said: “Job losses are an inevitable consequence of something of this nature.”
But he said it was too early to say how many there will be.
Mr Thorburn implied there are unlikely to be any branch closures, which suggests that the job losses will affect backroom staff rather than branch employees.
“We haven’t been closing branches for some time, I don’t see any need for change,” he said.
Yorkshire and Clydesdale have 337 branches in total. Yorkshire Bank, which was founded in 1859 in Halifax, has 185 retail branches, while Glasgow-based Clydesdale has 152 outlets.
The overhaul is expected to shrink the size of the UK operation and Mr Thorburn said that all parts of the business are under review.
This could mean the closure of some of the banks’ other businesses which include corporate banking, small business lending, assets finance, invoice finance, acquisition finance and a credit card business.
Mr Thorburn dismissed market speculation that Yorkshire Bank has already pulled out of acquisition finance, saying that is not the case.
“That doesn’t mean that acquisition finance is not under review,” he added. “Everything is under review.”
The overhaul could also involve a reduction in back office, IT and support function staff.
The group is expected to hold on to its core branch banking business, which Mr Thorburn said had performed well.
“Mortgages have held up well. Retail branch banking is in good shape, it’s strong,” he said.
While the UK operation remains profitable, parent company NAB said its margins are being squeezed by higher funding costs.
Mr Thorburn said the group’s funding costs have doubled since 2008. He said that the review will be driven by the faltering economic recovery and the changing economics of banking.
“There has been a change in sentiment.
“There were early signs of recovery that we saw in the spring, but then we had the eurozone crisis,” he said.
The group’s charge for bad debts was higher in the first quarter of the financial year as the “slow and fragile” pace of the economic recovery hit customers.
In the three months to December 31, the charge for bad and doubtful debts rose to 1.27 per cent of gross loans, up from 0.86 per cent in the previous six months.
When asked about a sale of Yorkshire and Clydesdale, which has been rumoured for the past three years, Mr Thorburn declined to speculate.
Analysts said the UK banks are worth over £2.5bn, but added that a disposal is unlikely in the current climate.
Referring to a potential sale, Credit Suisse analyst James Ellis said: “It’s very difficult to achieve book value in a divestment in the current environment. It would therefore seem unlikely that’s what the strategic review would seek near term.
“A business restructure seems more likely.”
NAB chief executive Cameron Clyne said the review will definitely lead to changes.
“The review will assess many options and it’s still too early to determine the recommenda- tion.
“We can say that retaining the existing business mix and structure will not be an outcome,” he said.
Last year, there was speculation that NAB could sell its UK assets in a reverse takeover to new banking venture NBNK, which would in turn bid for the 630 Lloyds branches on sale.
But the talks faltered and the Lloyds branches are now being sold to Co-op Bank.
Mark Joiner, NAB’s executive director of finance, increased sale speculation in late 2011 when he said NAB would prefer to own the UK assets, raise returns and exit a few years later or look at IPO options.
NAB’s UK assets have a two to three per cent market share and are profitable, but are a drag on the group’s overall returns.
Mr Thorburn said: “Although reshaping the business will mean that we will have to take tough decisions, we are confident that the outcome will provide a strong and sustainable future for Clydesdale and Yorkshire banks.”
ros.snowdon@ypn.co.uk
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Wednesday 23 May 2012
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