Slow recovery proves hindrance to Yorkshire Bank’s ambitions

The lender, which together with sister bank Clydesdale serves the UK through a network of about 340 branches, said subdued demand for credit and low interest rates continue to slow its ambitions to grow its balance sheet and income.

Yorkshire Bank, a subsidiary of National Australia Bank (NAB), Australia’s biggest lender, said the UK economic outlook “remains weak with slow recovery expected” due to the Government’s austerity drive and financial uncertainty in the Eurozone.

The lender blamed “delayed economic recovery” for “some deterioration” in the quality of its assets. The impairment rate for gross loans and acceptances 90 or more days overdue had increased to 3.34 per cent by the end of December from 3.15 per cent at the end of September.

However, the bank insisted it has seen no significant change in its credit quality. The trading update, covering the three months to the end of 2010, did not include detail on its financial performance.

Yorkshire Bank chief executive Lynne Peacock said: “Against a background of continued economic uncertainty, our UK business continues to demonstrate its resilience and our prudent strategic direction is unchanged.

“Clydesdale and Yorkshire Banks remain fully committed to supporting new and existing business and personal customers. We are firmly on course to deliver our two-year pledge to advance £10bn of gross new lending to businesses and mortgage customers by October this year.”

The bank launched its ‘Investing for Growth’ strategy in May last year, offering business customers a planning service and more flexible loans, as well as a commitment to lend £10bn to companies and homebuyers by the end of its 2011 financial year.

Yorkshire Bank also recently revealed plans to step up its services for small businesses to capitalise on the retreat of rivals and an expected increase in start-ups.

The strategy is expected to involve launching new products and a marketing campaign to target the sub-£1m turnover market.

Led by Gary Lumby, director of small business banking, Yorkshire and Clydesdale will pledge to offer many small businesses face-to-face services instead of the call centre contact often offered by the UK’s big retail banks. It will also promise to answer loan queries in 48 hours.

The lender will target businesses with turnover of up to £1m, although extending to £3m in some cases, dealing with companies which require financing of up to £250,000. Larger businesses will be referred to financial solutions centres.

“Small businesses are saying that banks are generally not open for business and they are finding it difficult to access credit at the right price,” said Mr Lumby.

“We’re going back to the future. It’s going back to what bank managers used to be like, without the stuffiness.” Yorkshire Bank published its trading update as Chancellor George Osborne revealed UK banks will be hit with a surprise £800m tax hike.

Mr Osborne said he was scrapping a lower introductory bank tax rate originally planned for 2011 – because the banking sector is returning to health faster than expected.

The Treasury had planned to phase in the levy, with banks paying a lower introductory rate on their balance sheets since the start of the year.

But the tax will be increased in March and April to offset this before settling at 0.075 per cent a month.

The tax, which was introduced on January 1, will now raise the full £2.5bn target in 2011 and 2012 before rising to £2.6bn for the following years.

The permanent bank tax applies to the global balance sheets of UK banks and the British operations of foreign firms. Lenders with a balance sheet of less than £20bn are exempt.

Yorkshire Bank said it is affected by the levy increase, but has not yet quantified the latest impact.

A spokesman said: “We were involved in the original consultation process and take the view that it’s simply a cost of doing business in the UK.”

The lender’s parent company, NAB, also published a trading update revealing first quarter profits up 18 per cent at A$1.3bn (£817m).

NAB said business banking continues to gain market share, but the proportion of assets 90 or more days overdue increased from 2.16 per cent to 2.21 per cent.

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