CLYDESDALE Bank has one standout acronym in its operation. And fortunately it is not one of those associated with complex wrapped-up loans tied indirectly to sub-prime lending.
SIVs (structured investment vehicles), CDOs (collateralised debt
obligations) etc walk by on the other side of the road from the bank, as its latest interim results show it has avoided the pitfalls hitting so many of its bigger peers in the sector.
Meanwhile, however, its iFS business, embracing 49 whizzy-sounding Financial Solutions Centres (FSCs) and addressing small and medium-sized business lending and private wealth management, goes from strength to strength.
The centres boosted their revenues to £612 million in the six months to end-March, up from £586m in the same period last year, helping Clydesdale and its sister group, Yorkshire Bank (which has 23 FSCs), boost pre-tax earnings 17 per cent to £194m.
The banks, the combined UK operation of National Australia Bank, had positive news virtually across the board yesterday.
Business lending and mortgage volumes at the banks are both robustly ahead. Underlying financial strength is also pretty good. Bad and doubtful debt charges are flat, £60m against £62m in March 2007, while the cost/income ratio is now around 58 per cent compared to 60 per cent a year ago.
Most reassuringly, perhaps, is that Clydesdale and its partner look largely underexposed to the frozen money markets that brought Northern Rock low and triggered major rights issues elsewhere in the banking sector.
Retail deposits and less volatile longer-term funding covered 85 per cent of lending in the first trading half. That leaves a conservative 15 per cent of funding exposed to the gyrations of short-term Libor lending among the banks.
Meanwhile, Clydesdale Bank PLC, which also incorporates all profits made under the Yorkshire Bank brand, has a Tier One Capital Ratio of 7.5 per cent.
That is one of the healthiest capital ratios in a sector that has become obsessed with the measurement of capital strength underpinning lending.
Perhaps the only negative is a continuing fall in the net interest margin – the difference between what a bank charges on the loans it makes and the interest it pays on deposits.
At Clydesdale and Yorkshire that is now 2.66 per cent against 3.16 per cent a year ago. But it is in line with general trends in UK banking for some years now as competition on the banking high street remains tough.
Where to now? Well, sometimes it is best to count your blessings than always be looking for new pastures.
Clydesdale said yesterday it did not really believe there were infill operations it needed in its very traditional banking model, and it does not give the impression it is straining at the leash to get into investment banking.
Even if pressures come in its important mortgage business, it looks better placed than most to cope and a world away from the mad roulette wheel that categorised Adam Applegarth's Northern Rock in the final months.
Clydesdale and Yorkshire's average loan-to-value for mortgages in the first half was 62 per cent so it has customers with a lot of equity in their properties.
And, anyway, they point out that the mortgage market, though under pressure, is in nowhere near the parlous situation of the late 1980s and early 1990s when interest rates were high, unemployment was high and negative equity entered people's vocabulary.
Sitting pretty would be overdoing it. But NAB's UK operations seem to be sitting more comfortably than many of their peers.
YOU would have to have the heart of a garden gnome not to feel a bit sorry for Dobbies, the Scottish garden centre group.
With blossom abounding, and hopeful gardeners making it the busiest time of its year, Dobbies is being distracted by the squabble between its two biggest shareholders, Tesco and Sir Tom Hunter, the business magnate.
Hunter, with a near-30 per cent stake, is to go to court to try and block Dobbies, where Tesco owns a controlling 65 per cent, from launching a £150m rights issue.
Hunter's stake will be diluted to 15 per cent if he does not take up his entitlement.
Some believe the rights issue is an unsubtle move by the supermarket giant to get an irritation off its back.
Whatever the results, when M'learned friends get involved, strained amicability goes out the window.
The full article contains 741 words and appears in The Scotsman newspaper.
