National Australia Bank, the parent company of Clydesdale and Yorkshire Bank, is to carry out a review of its UK businesses as conditions continue to deteriorate in the UK.
In a Q1 trading update today, NAB says operating conditions in the UK deteriorated during the quarter resulting in lower earnings.
The news follows reports that NAB rejected a £2bn offer for Clydesdale last September from private equity firm Sun Capital and in September last year, Moody’s downgraded Clydesdale after speculation it may be sold off.
Its UK business, which consists of over 300 bank branches, suffered a fall in revenue over the December quarter, while its bad debt charges rose.
NAB group chief executive Cameron Clyne says: “It is clear that the UK economy is likely to experience a much longer period of subdued growth with the ongoing sovereign debt crisis in the Euro-zone and the continuing austerity program by the UK government.
“UK GDP declined by 0.2 per cent in the December quarter. These difficult conditions have adversely affected the performance of UK Banking. Given our view that recovery is now a longer term prospect, NAB has commenced a strategic review, and will work with UK management to appropriately reposition its business mix and structure for the changed economic environment and improve returns.”
It will reveal the outcome of the review in May 2012.
NAB reported a cash profit of $1.4bn for the three months ended December, up from $1.3bn the same time last year.