Yorkshire Bank ‘lower risk’ but more work needed, AGM is told

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CAMERON Clyne, the chief executive of National Australia Bank, claims Yorkshire Bank is “lower risk and better capitalised” as a result of radical restructuring.

Speaking at the annual general meeting, Mr Clyne told investors that the UK franchise, which includes Clydesdale Bank, has made “important progress” but more work needs to be done.

Yorkshire and Clydesdale are cutting 1,400 jobs, closing 29 business banking centres in the South of England and retreating to their northern heartlands.

The banks have also transferred £5.6bn of commercial property loans to their parent’s balance sheet.

Michael Chaney, NAB chairman, told the AGM that the wider group’s results have been “below the budget”, which he blamed on the UK economic downturn hitting Yorkshire and Clydesdale.

“We have been working hard to reduce the drag of the UK business on the group,” said Mr Chaney.

“During 2010 and 2011, in recognition of the poor outlook for the UK economy, we were actively pursuing a number of options, including disposal of the business.

“Disposal ultimately proved not to be possible and, following declines in commercial real estate values and the economy late last year, we decided that the only sensible course was a radical restructuring of our UK banks.”

Yorkshire and Clydesdale reported a worse than expected statutory loss of £470m in the last financial year, mainly due to bad loans on commercial property.

Mr Chaney added: “The UK restructuring is now well advanced, although it will take the best part of next year to complete it.

“This will give us a UK banking operation which is largely self-funded and profitable.”

NAB revealed last month that full year profits fell 22 per cent to $4.1bn.

Investors voiced their concerns at the AGM with 21 per cent voting against the remuneration report.

“Shareholders are concerned with one thing, and that is how well a company performs relative to other companies,” Mr Chaney said. “NAB hasn’t done as well as some of its peers in recent years. That’s disappointed some shareholders and that is their response.”

Mr Clyne received $8.8m, last year, including nearly $4m in bonuses.

But NAB scrapped annual bonuses for UK CEO David Thorburn and executive director John Hooper, saying performance “is not where it needs to be”.

Meanwhile, NAB has appointed Rick Drury to be managing director of its UK commercial real estate group.

His 200-strong team is responsible for the £5.6bn worth of property loans transferred to NAB’s balance sheet.

A spokesman said: “NAB UK will manage... these loans in accordance with the existing terms of the relevant agreements.

“NAB is committed to maintaining a constructive dialogue with customers throughout the remaining loan term, and its intention is to seek the full repayment of each commercial real estate loan at the end of the maturity date.”

The spokesman declined to comment when asked if NAB would considering selling on the debt.

Mr Drury, an insolvency expert who trained at KPMG, has spent 16 of the last 23 years working in Australia and was most recently responsible for NAB’s worldwide high-risk asset management team.

Yorkshire has seen a series of high-profile departures as it reduces its headcount.

Patrick Walton, managing partner of the Leeds financial services centre, departed on October 31 after six years of service.

He is well known in the Yorkshire business community and is a former chairman of the Financial Leeds lobby group.

Mr Walton followed Kath Myers and Gary Lumby out of the business.

Ms Myers, a divisional director at National Australia Group Europe, left in the summer after 33 years’ service.

Mr Lumby stood down from his role as director of small business for Yorkshire and Clydesdale Banks last November to take on a part-time ambassadorial role.

Yorkshire Bank has plans to cut a total of 310 roles in the Yorkshire region by September 2015.

Down Under, the Australian economy has been booming, largely due to a surge in commodity prices and investment in its mining industry.

But speaking at the AGM, NAB chairman Mr Chaney warned of the slowdown in emerging markets like China and said Australia businesses would need to increase productivity to achieve acceptable economic growth in the future as the global economy slows.

He said 60 per cent of domestic growth in Australia had been driven by temporary factors.