Clydesdale loss worse than reported

National Australia Bank provided an alternative, and grimmer, view of its banking business in the UK, over the half year to March 2012, on Friday.

Financial statements for Clydesdale Bank, published by the NAB subsidiary on Friday, show the bank made a loss of £186 million in the March 2012 half compared with a loss of £43 million in the March 2011 half.

The bad debt charge in the income statement for Clydesdale for the half year was £416 million, up from £150 million for the same period in 2011.

In its interim financial statements, released earlier this month, NAB put its loss in the UK for the half year, on a "cash" basis, at £25 million. Most of the difference is due to the additional provision the bank has had to make for mis-selling of consumer credit insurance (an industry-wide issue in the UK).

The NAB group version of the UK financials put the charge for bad debts at £282 million, two-thirds of the level reported on Friday.

The extended recession in the UK, along with steep falls in property values, led NAB to a decision to carve off around £6 billion in property loans that will be managed on the NAB group balance sheet last month. The bank also said it would reduce activities in southern England and reduce staff as well.

It is now clear that the suggested cut in staff numbers at Clydesdale over the next two years, of 1400, will be more like 1200. Around 200 staff will transfer to the NAB group to manage the impaired property assets.

Of the 1200 jobs that will be cut, Clydesdale has so far cut 200 of these positions.

Malcolm Williamson, chair of Clydesdale (and a member of the NAB group board) wrote in an overview that the cut in the long term credit rating by Standard & Poor's in December led to lower net interest income "as cheaper money market and retail deposits were replaced by more expensive longer term wholesale funding and retail term deposits."

The accounts show that loans from NAB group to Clydesdale climbed to £8.6 billion, from £3.9 billion.

Clydesdale also said it had appointed four new directors over the last month.