Clydesdale and Yorkshire Banks are blaming the poor commercial mortgage market for millions of pounds of losses last year. The Australian owned British bank believe that it was bad debts on commercial properties that left them with no other choice but to report a £183m loss when comparing the year on year figures.
Overall the toxic debt count for the UK banks increased by about 90% peaking up at £631 million, and a large part of this is due to the fall in property prices in regions outside of London where the bank had plenty of commercial property mortgages. This has led to a drastic change in the way the bank will conduct its business in the UK.
At one point Clydesdale and Yorkshire was seen as a great competitor to larger high street banks in the UK offering some of the top commercial mortgage rates out on the market. However, now its parent bank the National Australia Bank has announced that it will scale back the amount of lending it conducts within the UK.
The National Australia Bank plans to cut about 1,500 customers over the next couple of years which has created quite a problem for small business clients that expected to have more time to deal with their properties. This is because the bank has called up their commercial loans when they come up for renewal.
This means that a small business with a commercial mortgage from Clydesdale and Yorkshire Banks will either have to pay off the mortgage in full or find someone else to transfer their mortgage too. For small businesses that are struggling this may leave them in a lurch as they may not have the credit to get approved for a new mortgage somewhere else.
Group Chief Executive for the National Australia Bank stated that it is not attempting to fire-sale its UK businesses, but he did admit that the UK challenges are causing problems for the group overall. Last year the poor performance of UK business actually offset the nine percent increase in profits that the Australian group would have otherwise been able to claim.
Chief executive for Clydesdale and Yorkshire, David Thornburn, stated that he believes the UK arm of the business is starting to improve and stated that they are making progress as they attempt to become more competitive.