Yorkshire Bank owner National Australia Bank has set aside more money to deal with the cost of rising customer complaints and regulatory challenges in the UK.
Yesterday’s announcement overshadowed an improving performance at its UK operation, which saw improved cash earnings during the first three months of its financial year to the end of December 2013.
The exact amount it is setting aside will not be clear until the company publishes its half-year figures to the end of March.
Clydesdale Bank, which includes Leeds-based Yorkshire Bank, increased the provision for payment protection insurance by £130m to £152m in the year to September 2013.
The bank took a £104m hit to cover mortgage payment irregularities and the mis-selling of interest rate hedging products and credit card protection among other matters.
National Australia Bank (NAB) said yesterday that the improvement in UK banking cash earnings was driven mainly by lower costs and a lower charge for bad and doubtful debts and asset quality was also improving.
However, the group said there was a wide range of uncertain factors relevant to determining the total costs associated with conduct-related matters, including payment protection insurance and interest rate hedging products.
NAB said the customer redress costs were negligible in the quarter, but said UK regulators were taking an active stance on NAB’s management of the situation and complaints had grown.
“The risk that additional provisions will be required for UK conduct related matters has increased since the 2013 full-year results and a full assessment of related provisions will be made... as part of the finalisation of the March 31, 2014 half,” NAB said in a statement to the Australian Stock Exchange.
David Thorburn, chief executive of Clydesdale and Yorkshire Banks, said: “While encouraged by the progress we’ve made, I’m resolutely committed to delivering a renewed, sharper focus on the customer right across Clydesdale and Yorkshire Banks.”
He added: “As a result, there has been a step-up in the pace of change to deliver improved support for our customers.”
Last month, the bank announced it had created “a new and enhanced product governance framework”, which will make sure that product approval, monitoring and governance goes all the way through the organisation to the board so that directors are held to account.
Mr Thorburn added: “The team will drive a wide-ranging programme of change to embed the culture and processes that will ensure all our products and services deliver fairness for customers now and in the future.
“More broadly, we’re looking at all aspects of the service, support and value we provide our customers.”
The bank’s recovery plan included the transfer to NAB of a troubled £5.6bn commercial property loan portfolio.
NAB reported that is being run off, and between October and December, its value fell from £4bn to £3.6bn.
Cameron Clyne, chief executive of NAB, said the group achieved a solid first quarter result and said there was improvement in asset quality and good growth in mortgages.
He said: “We continue to make progress on our refreshed group strategic agenda.
“Our new operating structure has now been implemented and for the first time this quarter we are able to report our results in line with that structure.”
He added: “Particularly pleasing was the further improvement in the performance of UK banking and the NAB UK commercial real estate run-off portfolio.
“Both continue to benefit from the restructure we undertook in 2012 and the recovery of the UK economy.”
David Ellis, head of Australian banking research at investment research provider Morningstar, said: “Whilst asset quality improved across the group, the troublesome UK businesses are clearly getting better.”
Speaking to the Yorkshire Post in November last year, Mr Thorburn said he had not considered resigning.
“What I’m focused on is trying to put this right, ” he added.
The bank has axed 1,400 jobs and retrenched from the South to its heartlands in the North of England and Scotland.
Yorkshire and Clydesdale banks have 323 branches, 43 business banking centres and 7,013 members of staff.
Yorkshire Bank has invested heavily in new technology, including mobile banking, and marketing over the last year.