The announcement comes after the banks’ owner, National Australia Bank, reported a 15.6% fall in profits to £1.32bn in the first half compared with the previous year. The bank’s British adventure has suffered a decade of disappointing returns and, in the six months to December 2011, made a loss of £25m, compared with a profit of £77m in the same period the previous year.
NAB bought the two UK banks in 1987 (Clydesdale) and 1990 (Yorkshire), and has seen a lot of turbulence since then. Clydesdale’s situation hasn't been helped by a downgrade in its credit rating, which has harmed profits and weakened the bank’s position further: a vicious circle it is struggling to break.
The restructuring is part of a ‘back to basics’ strategy of scaling down its business services operations, closing 29 of its 73 Financial Solution Centres and merging nine other centres with retail banking branches. It's pulling out of commercial property loans altogether and concentrating its consumer and business lending on the more affluent parts of the UK. The bank has also been caught up in the payment protection insurance (PPI) mis-selling debacle and the NAB has set aside £120m to cover claims.
NAB boss Cameron Clyne said the strategy is in a response to a ‘significant downgrade in the growth prospects of the UK economy', as well as more rumblings in the eurozone. He explained that refocusing on retail banking and SMEs would reduce the bank’s ‘risk appetite’ for business banking in the UK. Sounds like jargon to us, but one comment Clyne made in a statement was more revealing: he thinks retail banking in the UK still delivers ‘reasonable’ returns. If that means we've seen the end of big bank profits driven by debt-fuelled consumer spending, that wouldn't be such a bad thing...