Clydesdale Bank owner NAB expects the skeletons in its closet to cost a further £250 million after giving notice of further provisions for customer compensation over mis-selling.
The group yesterday used its third-quarter results for the three months to the end of June to give notice it would set aside an additional £75m for payment protection insurance (PPI) remediation and “at least” £170m to cover interest-rate hedging products.
The sums, expected to be recognised when preliminary results are published in October, take the total provision booked by the Australian banking giant to more than £800m.
NAB, which also owns Yorkshire Bank, said there was more to come.
New chief executive Andrew Thorburn said: “Conduct charges are difficult to predict, but we now expect we will need to take further provisions at the full-year result for both interest-rate hedging products and payment protection insurance.”
The bank said further provisions designed to cover the implementation of a new complaints procedure, the need to extend its historical records centre to include as-yet unindexed microfiche, a higher-than-anticipated number of complaints, and a regulatory probe into its previous complaints handling process would be required but could not yet be estimated reliably.
NAB also faces continuing pressure over Clydesdale’s unregulated tailored business loans (TBLs), and faces a campaign against “hidden swaps” spearheaded by the NAB Customer Support Group and Bully Banks.
Yesterday it admitted that the scale of future complaints over TBLs not covered by a regulator-mandated review was also “uncertain”.
Total provisions could yet rise further given an ongoing review of the products.
It said unaudited cash earnings climbed 7% on the corresponding period last year, to A$1.6 billion, with expenses falling by 6% and a charge of A$241m for bad and doubtful debts some 9% lower.
Mr Thorburn said the bank had realised a “satisfactory” result from an organisation “focused on driving better outcomes for customers and shareholders”.
He said the bank, which continues to face a “number of challenges” in its UK operations, would reveal details of an overhaul in a few weeks.
Clydesdale and Yorkshire have long been rumoured to be potential targets for sale or flotation, a suggestion oft-repeated by Australian analysts.
The group sold a £625m book of UK commercial property loans earlier this summer and plans to reduce its portfolio further, in what is mooted to be a deck-clearing exercise.
“While revenue growth remains challenging, Australian home lending continues to achieve market-share gains, and Australian business loan growth improved in what is traditionally a stronger quarter,” the group CEO added.
“Like all large businesses there are things we can do better at NAB, and we will have more to say on this at our full-year result on 30 October.”
NAB closed the day down 1.35% at 34.22 cents on the Australian Stock Exchange in Sydney.
Meanwhile, Clydesdale’s owner has restated its caution over Scotland’s independence referendum, saying it would monitor the situation closely.
But Mr Thorburn said the bank had “appropriate contingency planning in place”.
NAB previously declared its neutrality on the subject.
However, at the time of its interim accounts in May it said it faced risks associated with political uncertainty.
“The outcome of the referendum could have a material impact on the regulatory, fiscal and monetary regimes in Scotland,” it said.
“The potential effect of these changes is uncertain but could have a material impact on the bank’s costs, corporate structure and future business.”
It also warned that the outcome could impact on the economy and companies in its other heartland in the north of England, where the group operates under the Yorkshire Bank fascia.