CLYDESDALE Bank plans record investment in current accounts and other products to position itself as a cleaned-up 'challenger bank' readied for a sale, chief executive David Thorburn has said.
He was commenting after parent National Australia Bank confirmed a new "urgency" in the group's determination to exit the UK, and to consider "broader options including those provided by public markets".
NAB also stressed its "disappointment" at its two UK banks' £825 million of provisions for the mis-selling of payment protection insurance and complex loans, more than double the figure a year ago.
The provision will appear in the separate Clydesdale accounts and is likely to push the Glasgow bank to a loss in the region of the £614m suffered in 2012, after last year's £33m loss.
Mr Thorburn admitted that a regulatory fine for PPI complaint handling, following the £8.9m fine for mortgage errors a year ago, was "a distinct possibility" and that he was "not proud of any of these things". He added: "A lot of effort has gone into learning from this to ensure there is no recurrence."
But the recovering UK economy has driven a 90 per cent rise in pre-tax cash earnings at the two banks - Clydesdale and Yorkshire - to £203m, with bad debts almost halved to £80m. Underlying profits rose by a more modest 7 per cent to £283m, helped by a £35m or 5 per cent cut in operating costs despite increased investment. The capital strength ratio (tier 1 equity) climbed from 10.5 per cent to 12.2 per cent.
The group cautioned: "Revenue remains subdued, with strong growth in housing lending and higher margins ... offset by lower business lending and weaker fee income."
Mr Thorburn said growth in mortgage market share, with lending up 10 per cent, reflected increasingly active customers. "We are also experiencing pretty good demand for personal loans, credit cards and in the SME space, the pipeline is up quite a bit on a year ago."
The bank was now looking to grow its customer base with record levels of investment, accelerating the development of digital channels for both personal and business customers and launching new current accounts.
Payments Council figures show the Clydesdale lost a net 6,871 accounts in the first year of the seven-day account switching service. Mr Thorburn said the bank would launch "tactical and strategic" responses next year, adding: "What we don't want to do is be another me-too player."
The Treasury Select Committee in June grilled Mr Thorburn over the possible mis-selling to SMEs of fixed rate 'hidden swap' loans not covered by Financial Conduct Authority regulation. The FCA has said the Clydesdale and Yorkshire banks were them among the bigger sellers of 60,000 such loans - twice the 30,000 covered in its review of regulated swap-related loans.
The committee is now due to report on whether all such loans should be reviewed automatically. Mr Thorburn said the bank dealt with complaints in accordance with FCA rules. "Our fixed rate loans are the same as every other bank's," he said. "I would argue what we are doing is no different from any other bank. A number of complaints have continued to come in and we deal with them ... we are waiting to see what the committee report says."
He saw no reason to change the estimate given to MPs of "under £10m" in potential redress payments to around 300 customers out of 8,300 loans sold.
Mr Thorburn said: "The work we have done with legacy conduct issues has created a solid platform for this business to grow again and move forward on solid foundations."
He added: "The better job we do, the more likely is a positive outcome, and the longer we do that the more compelling the story is."
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