CLYDESDALE Bank has set aside a further £425 million for customer redress taking its total bill so far to more than £1.2 billion and causing its owner to issue a profit warning.

National Australia Bank, parent of Clydesdale and Yorkshire Banks, said there were £345m of new provisions relating to payment protection insurance (PPI) mis-selling with £80m of additional funds for claims on complex business loans.

Jeremy Roe, chairman of Bully-Banks, which has been campaigning for customers mis-sold certain business loans to be given compensation, said: "Bully-Banks welcomes every additional provision, but it is just another step along the way - not the end point. We anticipate these latest provisions will be way too inadequate. "

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While NAB said the latest projections were "adequate and appropriate" for its current financial year it warned there may be still be further pain to come. It said: "Dealing with conduct matters continues to be a significant and ongoing issue for the UK banking sector generally and there remains a wide range of uncertain factors relevant to determining the total costs associated with conduct related matters, including any possible fines."

In an announcement to the Australian Stock Exchange, NAB said the latest PPI provisions include costs to cover the rising amount of administering the complaints process and the implementation of a new handling process.

According to NAB that is leading to increased pay outs for new complaints and cases which had previously been closed. The growing costs also comes as Clydesdale is having to examine records from before the year 2000, including some which are on unindexed microfiche.

There also continues to be higher than expected levels of new complaints.

On the complex interest rate hedging products Clydesdale was said to have made further progress with reviews of some tailored business loans and derivative products. It did warn that the extent of future complaints of tailored business loans which have not been covered by its reviews remained uncertain.

David Thorburn, chief executive of Clydesdale and Yorkshire Banks, said: "While it's disappointing to have announced significant provisions for the legacy conduct issues we signalled in August, very real progress is being made in driving forward our clear commitment to fairness and investing in building a better bank for customers."

NAB chief executive Andrew Thorburn, no relation to the Clydesdale bank boss, said he was disappointed to be reporting larger charges relating to conduct in the UK. He said the issue is being dealt with transparently and quickly while the underlying performance of NAB remains strong and added: "Taking these decisions gives us more clarity going into the future and allows us to focus on the core Australian and New Zealand franchises, which remain in good shape."

NAB announced around £269m of other charges including impairment on the value of software, a provision for a deferred tax asset in its operations in the US and changes to its way of calculating research and development tax offsetting.

As a result full-year earnings will be around 14 per cent lower than anticipated, at around £2.8 billion, but the bank said it remained confident of paying a final dividend of 99 Australian cents, up 2.1 per cent on the amount allocated in its 2013 financial year. The combined impact of the latest provision will reduce common equity tier one capital, a measure of a bank's core financial strength, by 33 basis points but will still be more than 8.5 per cent.

NAB also outlined it would offer a discount to shareholders to encourage them to participate in a dividend reinvestment plan (DRP) where they take the payment in shares rather than cash. Alongside that it has arranged for more than £400m of new shares to be underwritten by an unnamed investment bank, over and above the expected £400m take up from the DRP scheme.