NAB makes UK bank pullout an ‘absolute priority’

National Australia Bank (NAB) is preparing to quit the UK market with the sale of its Clydesdale and Yorkshire Bank operations.

National Australia Bank
The announcement came as NAB announced a fall in cash earnings of almost 10 per cent over the past year, and followed the revelation earlier in October that the amount set aside for compensation for the mis-selling of payment protection insurance (PPI) in the UK would amount to £420 million in the current financial year.Only two months earlier, the PPI estimate was put at only £75 million, but it has now been recalculated because of a new complaints-handling procedure introduced by NAB after its previous one was deemed inadequate.Announcing the fall in annual profits to £2.9 billion, NAB chief executive Andrew Thorburn said the bank needed to concentrate on its core business in Australia, and that selling the UK banks, perhaps through a stock-market flotation, had become an "absolute priority".He added, "Our clear focus is on our Australian and New Zealand franchises and providing a better customer experience, and, as a result, we need greater urgency dealing [with] our remaining low-returning assets."In relation to exiting UK banking, this means we are now examining a broader range of options, including those provided by public markets."NAB's profits have been hit in the past year by £823 million in one-off charges, notably in the UK for PPI compensation and the mis-selling to small businesses of interest-rate-hedging products.The Scottish Clydesale Bank was bought by the NAB in 1987, and Yorkshire Bank in 1990. The combined business currently has 320 branches and more than 7,000 staff in the UK but has cost NAB dearly because of bad property loans. Additionally, the Clydesdale is subject to enforcement action in relation to its previous PPI complaints-handling process.Mr Thorburn insisted the UK banks were now well placed for "sustainable growth" after an efficiency drive and improvements in their product competitiveness. "Clydesdale and Yorkshire Banks are strong brands with good market shares in the communities in which we operate," he said.Omkar Joshi, an investment analyst at Watermark Funds Management, told the Sydney Morning Herald that NAB's overall results were somewhat below market expectations, but all the attention was on Mr Thorburn's strategy for improving NAB's future performance."Revenues in the second half were 1 per cent lower than the first half, which suggests that the operating trends in the business still remain challenging," Mr Joshi said. "However, the key focus is now on the new strategy that management is embarking on in refocusing the business on its core domestic franchises."Barclays reported profits of £3.72 billion in the first nine months of the year on 30 October, and set aside £500 million to cover "investigations" into foreign exchange trading.

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