NATIONAL Australia Bank (NAB) has signalled the restructuring of Clydesdale Bank will take much of 2013, but will result in a better performing and profitable UK business.
At NAB's annual general meeting in Perth, chairman Michael Chaney confirmed its UK operation, which also includes Yorkshire Bank, had been a drag on the group in a year when group net profit dipped 22% to A$4.08 billion (£2.7bn).
However Mr Chaney is hopeful a turnaround plan, involving 1400 job losses and a move away from the south of England to focus on heartlands in Scotland and the north of England, will leave a much improved bank.
Loading article content
He also confirmed attempts to offload Clydesdale, headed by Glasgow-based David Thorburn, had taken place during 2010 and 2011 but the poor outlook for the British economy meant NAB held on to the business.
Mr Chaney said: "Disposal ultimately proved not to be possible and, following declines in commercial real estate values and the economy late last year, we decided the only sensible course was a radical restructuring of our UK banks.
"Unfortunately the British economy fell back into recession in the months following that announcement and, at the time of our annual results, we announced a further A$250 mil-lion economic overlay, with a direct effect on cash earnings.
"The UK restructuring is now well advanced, although it will take the best part of the next year to complete it.
"This will give us a UK banking operation which is largely self-funded and profitable."
Shareholders at the AGM narrowly approved NAB's executive pay report. The 21% voting against fell short of the 25% needed to trigger a rethink.
NAB chief executive Cameron Clyne, who also serves as executive chairman of Clydesdale, pulled in A$8.8m (£5.7m) during the financial year with around A$4m in bonuses.
At the AGM Mr Clyne re-iterated a turnaround in the UK would help group results.
He said: "The strong performance of the Australian franchise was offset by a loss of £139m for the year in the UK.
"This reflects the deterioration in economic conditions in the latter part of the year in that region, giving rise to increased loan losses, mainly in our commercial real estate portfolio.
"We have progressed key outcomes of the UK Banking strategic review to simplify the UK Banking business model and improve its balance sheet structure.
"As a result of these changes, the UK franchise now operates with a significantly better funding mix and stronger capital funding position. It is a lower risk and better capitalised bank. This is important progress but there is still more that needs to, and will, be done."
Clydesdale aims to shed 1400 staff by 2015 and it said in October that 468 had already gone. Less than 100 of the job losses are thought to be in Scotland.
NAB has said Mr Thorburn will step down from the group executive committee to focus on restructuring Clydesdale.