NATIONAL Australia Bank has warned of continued uncertainty over mis-selling claims plaguing its UK subsidiary.
Yorkshire Bank returned to profit last year, helped by a deep restructuring programme and lower bad debts, but the legacy of past misdeeds continues to cast a shadow over its recovery.
The Leeds-based lender and sister brand Clydesdale increased the provision for payment protection insurance by £130m to £152m in the year to September 2013.
The bank took a £104m hit to cover mortgage payment irregularities and the mis-selling of interest rate hedging products and credit card protection among other matters.
David Thorburn, chief executive, said: “It’s clear we haven’t left the past behind entirely.”
Asked if anyone at the bank has taken responsibility for the mis-selling of products to businesses and households and the attempt to cover up mistaken mortgage payment calculations, Mr Thorburn said: “Last year when most of these issues were known, though to some extent are crystalising this year, we took the view across the board in the bank we wouldn’t pay bonuses.
“That in its broadest sense was us taking responsibility.”
He added that there may need to be “further accountability from myself down” if the review into the sale of interest rate hedging products raises further concerns.
Mr Thorburn said the review will reveal how the bank handled its customers and how it designed its products.
National Australia Bank said its UK subsidiary reported pre-tax cash earnings of £127m last year, reversing a loss of £183m the previous year. The charge for bad and doubtful debts fell £473m to £158m.
Mr Thorburn said the £175m restructuring programme, which includes the axing of 1,400 jobs, was the main driver of the UK operation’s return to profitability.
“We also have the tailwind from an improving economic environment, which is very helpful,” he added.
“What we are seeing now across our banking business and also our retail business is an improvement in asset quality, a reduction in bad debts and a pick-up in demand for lending.
“It’s more noticable in some product lines more than others - you can see it in mortgages but also in our business lending pipeline is starting to pick up.”