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Clydesdale and Yorkshire banks’ future under review

• 300-strong branch network employs 8,500 in UK
• Australian owner NAB blames slowing UK economy
• Networks could be sold or NAB could withdraw from risky sectors

The Australian owner of Clydesdale and Yorkshire banks is reviewing the future of its UK business as a result of the “recent reversal” in the UK economy – raising fears for up to 8,500 jobs.

National Australia Bank (NAB), which is based in Melbourne, bought Clydesdale in 1987 and Yorkshire in 1990, and had until recently been regarded as a potential suitor for other branch networks being put up for sale in the UK. It currently operates 300 bank branches.

But yesterday Cameron Clyne, chief executive of NAB, said it was now clear “that the UK economy is likely to experience a much longer period of subdued growth with the ongoing sovereign debt crisis in the eurozone and the continuing austerity programme by the UK government.” He added: “These difficult conditions have adversely affected the performance of UK banking.”

As a result, NAB has ordered a “strategic review” of the UK business to “appropriately reposition its business mix and structure for the changed economic environment and improve returns”.

The UK arm might now become a target for NBNK, the new bank run by former Northern Rock chief executive Gary Hoffman, and which failed to be selected as a bidder for the branches being sold by Lloyds Banking Group. However, an outright sale of Yorkshire and Clydesdale might prove difficult. The bank, which employs 8,500 people across both UK networks, intends to announce the outcome of the review – which is already under way – by the time of its interim results in May.

Cathy Jamieson, Labour MP for Kilmarnock and Loudoun and a shadow Treasury minister, seized on the remarks about austerity cuts to call for a “change of course” by the government. “I know the staff employed in the branch network and telephone operations in Scotland are highly valued by the company and they will want early reassurance. But the comments from the owners of the Clydesdale about the continuing programme of austerity and the stalled economic recovery should act as a profound warning to the government.”

While there was immediate speculation that potential bidders might emerge for the two banks, there were also suggestions that NAB might not withdraw altogether but pull back from riskier lending, for instance on commercial property.

NAB had been expected to bid for the branches that Lloyds Banking Group has put up for sale and City speculation about the Australian bank’s commitment to the UK market has swirled for many years, particularly as the bank is often cited as a competitor to the big four high street banks. The Co-operative Bank is in detailed talks with Lloyds over the sale.

David Thorburn, chief executive of Clydesdale Bank and Yorkshire Bank, stressed that while “tough decisions” would need to be made, his intention was to create stronger banks.

“The time is right for us to re-examine our business given the recent reversal in the economic recovery, the structural changes in the UK banking market and our performance in that context … Getting the right business mix and structure is vital and the review will shape that. … However, it is already clear that the economics of our retail banking operation are strong,” Thorburn said.

In the UK, NAB said lending activity was “subdued” and fees were down because of the weak economy, while the charge for bad and doubtful debts was rising. © 2012 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds