The Clydesdale Bank turned to the Bank of England for funding assistance after the end of its financial year in September when a strong first half petered away to leave profits flat for the year.

The Clydesdale Bank turned to the Bank of England for funding assistance after the end of its financial year in September when a strong first half petered away to leave profits flat for the year.

After a year in which most of its UK rivals sought capital injections, posted losses and/or been taken over, Clydesdale chief executive Lynne Peacock made much of the bank's "traditional" approach which allowed it to post a pre-tax profit of £343m - £1m, or 0.3%, down on 2007.

The company's pre-tax profits had been 17% ahead at £194m at the half-year stage before it took a hit from rising defaults on company loans. It took a £175m charge, up 47% on the year before, to cover bad debts for the year.

Peacock said: "We are pleased when you think about what is going on in the world and the impact of economic conditions. In the UK a number of banks have struggled to survive and our pre-tax profit has been maintained."

The company, owned by National Australia Bank and encompassing the Clydesdale and Yorkshire Bank brands, said that since the year end it made its first call, for £1.3bn, on the Bank of England's special liquidity scheme (SLS).

This allows banks to swap assets they can't sell, such as mortgages, for government bills which they can.

The scheme, which is thought to have been used by most UK banks, was tapped to help the Clydesdale replace some of the money it would usually get from securitisation - packaging up loans and selling them on - that previously accounted for 10% of its funding.

Peacock said: "The way the market has gone, the SLS is relatively competitive compared to what is out there."

The Clydesdale conducted one of the last loan securitisations in August 2007, before the emerging US sub-prime mortgage assets hit confidence. It had planned a similar deal for 2008.

Around 72% of the Clydesdale's funding is from customer deposits and the rest from long-term and short-term wholesale markets, including from parent company NAB, which itself posted a 28% fall in profit yesterday.

The Clydesdale saw retail deposits increase 16.7% to £2.6bn after it saw particularly strong input from small and medium-sized companies.

But its loan book also expanded 27.6% to £34.1bn as business loans rose by 40.7% to £5bn, mortgage lending increased 13.4% to £1.4bn, and it took a transfer from sister company NAB Capital.

The company's capital cushion also dropped from 7.8% to 7.6% on a core tier one capital measurement.

Profits at the Clydesdale, which employs 8758 people in the UK including 3941 in Scotland, were hit by a £175m charge to cover loan defaults, up £55m from the year before.

Peacock said: "It is primarily against business (loans) and it is against quite a low base."

Chief operating officer David Thorburn said: "We have had three or four years now of strong growth in our business bank and inevitably at some stage we were going to catch up with the market.

"In addition over the last 12 months we have seen quite a material downturn in property values and there has been an element in our bad debts that reflects that."

Some 20% of the company's total assets relate to loans against commercial property.

Peacock indicated that the company expected to continue making similar provisions through 2009.

"I do not think we will necessarily see things fall in the short term," she said.

The Clydesdale has also seen the value of its mortgages in arrears by more than 90 days increase by 25% over the year to 0.51%. This, the company says, compares favourably to an industry average of 1.33%. It does not take on sub-prime or self-certified borrowers.

The bank has 342 branches, of which 152 are Yorkshire Bank branded. This compares to more than 1000 operated by HBOS, parent of the Bank of Scotland, and around 2300 run by Royal Bank of Scotland in the UK.

But Peacock dismissed recent analysts comments suggesting that the Clydesdale is still sub-scale.

"If I was being cheeky I would say the last 12 months have not really convinced us that big has been beautiful. The consolidation that has been going on in this market gives us opportunities. It does not give me cause for fear."