NAB 'happy with status quo' in UK

NATIONAL Australia Bank (NAB), which owns Yorkshire Bank, said it was happy with the status quo in the UK and any acquisitions it made there would have to meet its financial criteria.

NAB chief executive Cameron Clyne also told analysts there were no immediate plans to change the mortgage rate despite rising funding costs.

NAB's UK operations - which also include Clydesdale Bank - have been the subject of speculation with some reports indicating Spanish banks have bid for the business.

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NAB has posted quarterly cash earnings that lagged expectations and it has also warned of rising funding costs and weak demand for corporate loans until 2011.

Australian banks have emerged from the global financial crisis stronger than their peers overseas and are now sitting on record amounts of capital. But they face challenges from the rising cost of deposits and wholesale funds as well as weak credit demand.

NAB, led by chief executive Cameron Clyne, has lagged peers as it focuses on acquisitions and winning customers with lower fees and the cheapest home loans.

"Next year, overall credit is going to be weak and business credit worse as corporates are still cashed up," said Mark Nathan an analyst at Arnhem Investment Management.

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A NAB business survey released found a record 53 per cent of firms did not need to borrow in July and business confidence slipped to a 14-month low.

But Mr Clyne, the youngest head of Australia's top four banks, said the mainstay corporate lending pipeline was strong and demand should come back.

"We do now believe that given the recent volatility in the global economic environment and a federal election around the corner, the return to business system credit growth may be delayed longer. More likely a feature of 2011," Mr Clyne said.

Like banks elsewhere, NAB also gained from sharply lower bad-debt charges in the quarter. NAB, Australia's top corporate lender, said overall business lending fell 1.1 percent.

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Third-quarter cash earnings were A$1.1 billion ($1.01 billion), below analysts' expectations for A$1.2 billion but on course to match its pre-crisis annual earnings of A$4.4 billion. NAB is the first among the country's top four banks to report earnings.

The lender tried to soothe investors' concerns, saying net interest margin was stable with nearly all its wholesale funding needs raised for the year.

"The cash profit number was below the views of a few but margin stability gives reason to cheer," Don Williams, chief investment officer at Playtpus Asset Management, said.

"The commentary was not surprising given the domestic economy came out of a tough June quarter reeling under several central bank rate hikes. In all not much for either bulls or bears."

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