Yorkshire Bank sees hopeful signs

In a third quarter trading update, it said that Yorkshire and sister bank Clydesdale are on track to deliver 10bn of gross new lending by October next year.

Following speculation that NAB could sell its UK operations, the group said it is happy with the status quo in the UK and any UK acquisitions would have to meet its financial criteria.

There has been speculation that NAB received a bid from Spanish bank BBVA in June, but at the same time NAB is understood to have bid for the 318 RBS branches that were eventually sold to Spanish bank Santander.

NAB has also been linked to the possible acquisition of 350 branches being hived off by Lloyds.

Talking about trading in the three months to June 30, NAB said that while credit demand remains subdued at Yorkshire Bank, business confidence is showing some signs of improvement.

It added that deposit growth remains strong in a highly competitive market.

The charge for bad and doubtful debts improved compared with the third quarter last year, although trading conditions remain challenging for businesses and the group said this is reflected in asset quality measures.

Yorkshire Bank said the UK economy showed signs of recovery during the quarter, but overall a cautious outlook remains appropriate.

It added that the economy is still absorbing the effects of the June emergency budget, which set out the new Government's programme for deficit reduction.

It also said that financial concerns about European banks are an additional reason for caution.

Lynne Peacock, chief executive of Yorkshire and Clydesdale Banks, said: "We continue to follow a very steady and prudent course. While the signs of economic recovery remain encouraging, our strategic direction is unchanged."

She said the UK banks are firmly focused on growing the existing business and they remain committed to supporting existing customers.

Talking about its Australian business, NAB warned of rising funding costs and weak demand for corporate loans until 2011.

Australian companies have little borrowing appetite now as they are holding surplus capital.

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