Clydesdale sees profits rise 16%

THE Clydesdale Bank has seen its profits surge by 16 per cent in the past year as it shrugs off the effects of the credit crunch and moves on from a turbulent spell.

Despite the economic slowdown, the bank saw the number of mortgages it sold increase by a fifth from last year, while lending to businesses was up by a quarter.

It continues the gradual turnaround in the bank's fortunes since its owner National Australia Bank, headed by Scottish chief executive John Stewart, instigated a three-year revival plan.

Profit before tax increased by 16.3 per cent to £379 million in the year to the end of September, and the firm's performance in key product areas outperformed the market.

David Thorburn, chief operating officer at Clydesdale, which operates as Yorkshire Bank in England, said that the firm was now going from strength to strength following its turbulent spell in recent years. He said: "We have put our past difficulties behind us and Clydesdale Bank is a growth story now.

"Nothing in business stands still, and we will always look to improve, but all of the major (restructuring) work is behind us now for the foreseeable future."

The amount of its income spent on costs - a key indicator of profitability - improved from 61.1 per cent to 58.4 per cent, continuing the gradual decrease since September 2005, when it reached 64.9 per cent.

A restructuring of business banking is credited with helping business lending increase by 25.7 per cent to £12.4bn.

A key part of the success, Mr Thorburn said, is its financial solutions centres, such as the one on Lothian Road, which aim to provide a one-stop shop for owner-managed businesses.

Lynne Peacock, Clydesdale's chief executive, said: "These results demonstrate our UK business is continuing to deliver strong and sustainable growth during turbulent market conditions."

Parent firm National Australia also saw a strong increase in profits, with cash profits up in the second half by nearly a fifth to a record £1.9 billion.

Chief executive John Stewart, originally from Edinburgh, said the firm had no direct exposure to subprime loans, although he admitted that he expects business and housing credit to slow due to higher interest rates.

Mr Stewart said: "We will continue to simplify processes and efficiency opportunities are still significant.

"We are well positioned for the years ahead and I am very optimistic about our future."