UK PPI claims trigger National Australia Bank profits warning

Hefty charges to compensate customers mis-sold financial products by Clydesdale and Yorkshire banks have reverberated through to their Australian parent company which has warned that its profits will be sharply dented.

The new boss of National Australia Bank, Andrew Thorburn, said the charges for mis-selling payment protection insurance and interest rate swaps were disappointing as the bank took a £670m hit to cover the cost of compensating customers.

“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,” said Thorburn, who signalled bonuses for the bank’s management would be cut.

The unscheduled statement was released during Australian trading hours ahead of a formal statement on 30 October about its full-year performance. NAB detailed a £420m provision for PPI and £250m for interest rate swap mis-selling while other charges of £269m were also taken for IT systems and deferred tax assets that had been held in the US.

As a result of these string of charges, NAB said it expected its profits to be in the region of A$5.1bn (£2.8bn) and A$5.2bn – some 14% below the market’s expectations.

The Melbourne-based bank bought Clydesdale in 1987 and Yorkshire in 1990, which like other UK banks have become bound up in the PPI and interest-rate swap scandals. The two operations, which have slimmed back in recent years, employ 7,100. Asked on a conference call about the future of the UK business, which has been the subject of speculation about a sale, Thorburn deferred his answer until the end of the month when the next scheduled announcement is due.

David Thorburn, who runs 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.” He is not relation to the new boss of the bank.

The UK head has previously told the Treasury select committee that the bank was wrong to sell complex financial instruments, such as swaps, to its small business customers.

The additional cost for PPI mis-selling was in part due to the fact that Clydesdale is involved an enforcement process by the Financial Conduct Authority about its handling of customer claims in the past.