Yorkshire Bank hails improving impairment trend

National Australia Bank is understood to be in the running to buy more than 300 branches from Royal Bank of Scotland, and has also been linked with potential offers for the so-called 'good' part of Northern Rock, as well as Lloyds Banking Group branches.

Yorkshire and Clydesdale banks yesterday reported a 17 per cent

increase in pre-tax profits to 81m for the six months to March 31, once bad and doubtful debts of 183m were included. Underlying pre-tax profits were up 11 per cent to 264m.

The banks' results also showed an improving trend on impairments. While bad and doubtful debts increased by nine per cent or 15m on a year earlier, they were down 28 per cent on the previous half-year.

"I don't want to declare victory (on impairments) but there are a lot of encouraging signs," said UK chief executive Lynne Peacock. "We're pleased with these results because they demonstrate strength and resilience."

Yorkshire and Clydesdale grew deposits by 12 per cent or 2.4bn during the period, helping boost liquidity and capital ratios.

Mortgage arrears were significantly below the industry average and Ms Peacock said soured commercial property loans now make up a smaller proportion of the impairment charges. Of its impairment book, about 70 per cent are business loans, with half of these commercial property. "That shows that the market is beginning to turn," she said.

Ms Peacock declined to comment on a bid for the RBS branches. "We have always said we have got a very strong organic growth platform and if we saw things that demonstrably added to that we would consider them."

Group chief executive Cameron Clyne added: "NAB is under no pressure to participate in the consolidation and will only do so if it creates shareholder value."

The banks, which employ more than 1,900 in Yorkshire, yesterday followed up on a pledge to deliver 10bn of new business and mortgage lending by October 2011 by unveiling a new support package. Investing for Growth will offer business customers a planning service and more flexible loans.

"We are starting to see businesses investing again," said chief operating officer David Thorburn. "We are trying to send the message that we are open for business and flexible."