Bad debts hit Yorkshire Bank owner

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YORKSHIRE and Clydesdale Banks racked up annual losses of £183 million for their Australian owner today after a sharp jump in bad debt provisions.

National Australia Bank said falling property values in the current economic climate caused its charge for UK bad and doubtful debts to rise to £631 million in the year to September from £296 million a year earlier.

It also faced higher funding and liquidity costs, partly as a result of credit rating downgrades forcing it into more expensive wholesale markets.

The loss at the UK division, which has 333 branches, overshadowed robust trading in Australia and New Zealand as the company reported flat pre-tax profits of 7.8 billion Australian dollars (£5 billion).

NAB announced a strategic review in April that will focus the two businesses on retail operations and business lending in their heartlands of Scotland and the north of England. It is planning to cut about 17% of the UK workforce, equivalent to around 1,400 jobs, by 2015.

And earlier this month, the vast majority of the UK commercial property portfolio was transferred to NAB in an effort to improve Clydesdale’s balance sheet and simplify the business.

NAB bought Clydesdale Bank in 1987, followed by Yorkshire Bank in 1990. The banks were the subject of deal speculation last year after NAB was unsuccessful in the auction of 318 branches put up for sale by Royal Bank of Scotland.

The company said bad debt provisions in UK retail lending continued to show improvement and that average customer deposits increased by around £500 million or 2% as a result of a drive to attract more business.

Other operating income decreased by £6 million or 2% in the year, driven by lower fees and commissions in the economic climate and subdued demand for credit.