Clydesdale drags on NAB 22 February 2010 6:04PM Ian Rogers Britain's lethargic economy remains the chief drag on any recovery in earnings for National Australia Bank. The UK region contributed more than half the increment in loans classed as "90 days past due and impaired" for NAB over the December 2009 quarter.In the bank's trading update for the December quarter, released on Friday, NAB said the ratio of loans either seriously overdue or impaired increased to 1.84 per cent, up from 1.75 per cent at September 2009.In Britain this ratio increased to 2.90 per cent at December 2009 from 2.61 per cent at September 2009. NAB said commercial property loans accounted for most of the rise in this ratio.NAB is yet to release corresponding data for Bank of New Zealand or for its core Australian banking business.Rising ratios of problem loans did not stand in the way of NAB cutting the charge to the profit and loss for dud loans in the December quarter. NAB said this fell to $739 million in December from $941 million in September.This allowed NAB to report unaudited cash earnings for the December 2009 quarter of approximately $1.1 billion, an increase of more than 20 per cent on the September 2009 quarter. NAB said this included a contribution of $33 million from recent acquisitions (such as the investment platform Aviva and the home loan funder Advantedge), so the core increase in cash profit for the quarter is more like 16 per cent.Cameron Clyne, NAB's managing director, said he believed the June 2009 quarter would prove to be the worst, in terms of new impairments, for this cycle but said quarterly impairments and bad debt charges may fluctuate over the financial year to September 2010.Unlike Westpac earlier in the week, NAB opted to publish its quarterly trading update without also publishing the quarterly "pillar 3" report on risk and capital.