Thorburn steps down to focus on UK overhaul

David Thorburn “agreed to step down” from the group executive committee to focus on the restructuring of the two banks, said NAB.

In a trading update, NAB reported cash profit of A$1.4bn in the three months to June 30, less than the A$1.5bn expected by analysts.

It said statutory earnings were hit by charges relating to the restructuring of Yorkshire and Clydesdale, which started earlier this year.

Group revenue fell around one per cent, reflecting higher UK funding costs and lower volume in its markets business.

Bad debt charges dropped seven per cent to A$524m, but asset quality at its UK business deteriorated further and its business banking division saw higher bad debt charges.

NAB has previously disclosed it would take a A$740m charge for the restructuring of the UK operations, which includes closing its commercial property business.

Cameron Clyne, the group CEO, said: “NAB delivered a stable result for the quarter and made further ground against its strategic agenda to strengthen the Australian franchise.

“This quarter’s result is set against a backdrop of ongoing challenges in the global economy with continued uncertainty in the eurozone and the United States, volatility in global financial markets, and slowing growth in the big emerging economies.”

He said UK banking results were weaker due to lower revenue, mainly from increased funding costs. The charge for bad and doubtful debts was lower “but remains elevated”.

Yesterday’s results still put NAB on course for a second straight year of record profit, but highlight investor concerns over slowing growth in loan demand and NAB’s UK operations.

“The way the UK economy is panning out, bad-debt provisions for NAB are not going to stop any time soon. All they can do is sit and weather it out,” said one investor.

“A lower-quality quarterly earnings outcome than what we were expecting,” said Credit Suisse analyst Jarrod Martin, adding that further weakness in UK bank asset quality and a weaker-than-expected capital ratio was a concern.

The UK restructuring will see 1,400 job cuts and the closure of 29 business banking centres in the South as the banks retrench to their heartlands.

Around 100 of these job losses will be felt in Yorkshire before the end of the year.

Mr Clyne has blamed the cuts on Britain’s economy being “longer and slower to recover than experienced in the 1930s”.

Mr Thorburn said in a statement yesterday: “We are moving forward with our strategy to become a stronger and more competitive business following our strategic review announcement at the end of April.

“My priority has always been the UK business and stepping down from the group executive committee will enable me to dedicate all of my time to this important restructure programme.

“The steps we are taking are difficult, particularly for our employees, but it is clear we have the right plan and I am confident that what we are doing is in the best long term interests of the organisation and our customers.”

The group role required regular attendance at meetings on the other side of the world, meaning a dozen 24-hour flights a year, plus the regular early morning and late night calls.

Mr Thorburn will continue to report to Mr Clyne, as group CEO and chairman of the UK board.

Yorkshire Bank will merge its Leeds back office operations into one site at Merrion Way, closing its Brunswick Point office.

The UK banks have also ceased commercial property lending, with their Australian parent taking control of a £6.2bn book of problematic loans for office blocks, warehouses and housing developments.

However, NAB has ruled out an imminent sale of the banks, and is instead prioritising improving their return on equity – a key measure of profitability in banking.

Last month, John Hooper, a senior executive in the UK business, told the Yorkshire Post that the economic downturn and changes in the financial services sector “have adversely affected the economics of banking”.

In response, he said the banks are simplifying their business models, cutting their cost base, transferring most of their commercial property loans to NAB, reducing their risk appetite and focusing on the North of England and Scotland.

Speaking at the Yorkshire Post Business Club, Mr Hooper said: “NAB has an asset that it has invested heavily in and supported when it has needed to, and, like anyone would, it expects a return on that investment.

“The fact that we are seeing the group take a more active role has to be positive for the long-term health of the bank – it wants and expects to see success.”

@bernardginns