NAB sets date for Clydesdale divorce

National Australia Bank (NAB) announced that it is to float its British subsidiary on the London and Australian stock markets in early February next year as it issued its full-year figures.

The move will see 25 per cent of the group sold to institutional investors while 75 per cent of the shares will go to the Melbourne lenders’ existing shareholders.

NAB has had to inject £620m of capital into the scandal-hit Clydesdale group to build up its core capital from a ratio of 9.4 per cent of liabilities to 13.2 per cent and has agreed to set aside £465m as compensation for mis-sold payment protection insurance and mis-sold business loans.

This is in line with a statement to the stock exchange in August, and is added to £1.2bn set aside in previous financial years.

NAB is providing a further £120m for future costs of mis-selling and mis-conduct. That reduces its maximum exposure to future mis-conduct costs (which has been required by the UK financial regulator, as a condition of the float) to £1.1bn.

Earlier this year, Clydesdale was fined more than £20m for its handling of customer claims. The regulator found that it had been falsifying customer records and presenting those to the ombudsman.

They showed cash earnings were down by £2m to £156m.

Customer lending was up £1.1bn or 4 per cent to £28.7bn.

UK mortgage lending was up 11.2 per cent to £20.5bn, slightly increasing Clydesdale’s share of the mortgage market to 1.61 per cent per cent.

Customer deposits were up £2.5bn or 10.3 per cent to £26.3bn.

Business lending fell, however, by 11.3 per cent to £7.1bn. This was due to a run-off of poorer quality assets, plus “subdued demand for credit and competitive pressures”.

The bank saw its operating expenses rise by £45m or nearly 7 per cent, partly due to the cost of restructuring and preparing for the break from NAB, and partly due to marketing investment.

Its reduction in charges for premium current accounts, to make them more competitive, hit earnings.

Bad and doubtful debts fell by more than half to £38m.

The number of branches fell from 294 to 271, while the number of customers choosing to bank online rose by 10 per cent.

Clydesdale Bank’s new chief executive, David Duffy, said they were “positive results”.

He added: “Our balance sheet is robust, with improved asset quality and stronger capital ratios. We are challenging the way we have worked historically, questioning the commercial viability of everything we do and creating more agile working practices.

“By keeping our focus on how and what we deliver for customers, we have created a strong platform on which to build an exciting future for us as an independent bank.

“In doing that, I believe we have the ability to offer our customers an attractive alternative to the status quo of banking in the UK.”