Cost cuts put Yorkshire Bank owner back in the black

The lender, owned by National Australia Bank (NAB), said it has largely completed its restructuring a year early, including axing 1,400 jobs.

That helped it report pre-tax cash earnings of £127 million for the year to the end of September, reversing losses of £183 million a year earlier.

But past mistakes continue to haunt the lender, as it added another £130 million charge to compensate customers mis-sold payment protection insurance (PPI), taking its total provision to £152 million.

It also booked £36 million during the year for interest rate swaps mis-sold to small businesses, plus £13 million for credit card insurance sold through disgraced financial services firm CPP Group.

The lender was also slapped with an £8.9 million fine by the City regulator last month after it forced 22,000 customers into higher mortgage repayments to rectify a previous error by bank staff. Including customer compensation, it will cost the bank about £42 million.

Chief executive David Thorburn said: “The positive impact of our strategy is clear to see in the underlying business performance.

“However, conduct related matters have impacted our performance and I fully recognise that our recovery won’t be complete until we’ve concluded them. We have learned lessons from this.”

Its charge for bad and doubtful debts plunged by £473 million to £158 million, largely driven by its transfer of £5.6 billion of soured UK commercial property loans to its Australian parent.

NAB has now shrunk that book of problem loans to about £4 billion.

Britain’s improving economy also helped cut losses on business and retail loans, while mortgage loss rates were stable.

The lender’s core tier one capital ratio - a key measure of financial strength - improved to 10.8% from 8.4%.

Customer deposits shrunk 2.8% to £24.6 billion, but it said mortgages grew 7.5%, ahead of the market.

Higher lending margins and an “improved retail deposit mix” helped its net interest margin - the difference between what it makes on loans and pays out on deposits - improve to 2.12% from 2.03%.

Its Australian parent saw net profits increase 9% to 5.94 billion Australian dollars (£3.53 billion). NAB last year admitted attempts to sell Yorkshire and Clydesdale had been unsuccessful as it unveiled the deep cost-cutting drive.

Yorkshire and Clydesdale banks now have about 7,000 full-time UK staff and 323 branches.