Clydesdale weathers storm as profits rise

CLYDESDALE Bank has seen profits power ahead as it dodges the worst effects of the credit crunch.

The company, which trades as Yorkshire Bank in England, saw pre-tax profits rise 17 per cent to £194 million. Cash earnings also powered ahead by 18 per cent, as the company hailed a "stand-out" performance in turbulent market conditions.

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

The results for the six months to March 31 are slightly above the 16 per cent profit growth recorded in the 2006/07 financial year. The company also recorded 16 per cent growth in mortgage volumes, at a time when many lenders are making it difficult to borrow.

David Thorburn, the bank's chief operating officer, said: "The bank is weathering the storm well. What Clydesdale Bank does is very much what the man and woman on the street would expect a bank to do: we have branches that lend money to customers for mortgages and to businesses.

"The problems in the last six months have been in areas of business we just do not operate in. We haven't really had to change our credit policy or our lending policy. We just don't do 100 per cent mortgages or self-certification mortgages and we don't have a big exposure to buy-to-let."

The bank's cost-to-income ratio, seen as a key measure of profitability, has continued to improve, and is down to 58.3 per cent, compared with 60.3 per cent in March 2007. Despite the current uncertainty, Clydesdale is confident it can continue to be a growth story.

"It is a very uncertain time for financial firms and the economy, and it is difficult to say what lies ahead for the country," said Mr Thorburn. "But our company is in great shape and is able to adapt well."

Falling capital ratios were cited as the main reason that HBoS and Royal Bank of Scotland moved for rights issues, but Clydesdale has one of the strongest capital ratios in UK banking, a tier-one capital ratio of 7.5 per cent and a total capital ratio of 11.4 per cent.

Lynne Peacock, chief executive of NAB's UK operations, said: "Representing a stand-out trading performance in turbulent market conditions, we have delivered another set of excellent results.

"We are very proud of our achievements over the past three years. Well prepared for the challenging market conditions in which we operate, our business continues to demonstrate strong growth and profit momentum."

But the NAB group overall was less certain about the future, despite delivering an eight per cent rise in first half profits. Mr Stewart, who is originally from Edinburgh, said: "The future's uncertain. We're hoping for the best but, quite frankly, we're planning for the worst."