David Duffy promises major investment in Yorkshire Bank brand

David Duffy said the proposed demerger from National Australia Bank and initial public offering will give the region a lender that has control over its own destiny.

He told The Yorkshire Post that Yorkshire Bank’s ambitions to grow in its communities will be beneficial for the local economy.

His comments came as parent company National Australia Bank said continued progress has been made towards independence with the transaction due to take place in February.

Yorkshire and Clydesdale banks will be dual listed on the London and Australian stock exchanges and are expected to have a market capitalisation of between £2bn and £2.5bn.

Mr Duffy said he will invest heavily in both brands, adding that “Yorkshire has a very, very strong capability and history and there’s no need to change that. I am very clear that we will be investing in it more materially than we have in the past.”

He added that Yorkshire and Clydesdale have “a unique opportunity” in the challenger banking market to take on the main high street banks.

He said they have full scale with retail and SME banking operations, a fully independent, as opposed to carved out, IT system and are strongly capitalised and well funded.

“All the others are single elements of challengers,” he added. “The franchise has all of that and history and strong brands.”

With its £28bn loan book, Yorkshire and Clydesdale are the largest of the challenger banks with Virgin Money and TSB the closest rivals.

Mr Duffy would not rule out mergers and acquisitions activity in the future but said Yorkshire and Clydesdale would need to “deliver a track record to earn the right to have any of those conversations”.

Such a move would involve fundraising and this would need investor confidence, he added.

Yorkshire and Clydesdale today reported cash earnings of £156m for the year ending September 2015, down 1.3 per cent on the previous year.

The common equity tier one - a measure of financial strength - increased from 9.4 per cent to 13.2 per cent over the period.

Customer lending rose 4 per cent to £28.7bn, while deposits increased by 10 per cent to £26.3bn.

Bad and doubtful debt charges halved to £38m, reflecting the improving economic climate.

Yorkshire and Clydesdale recognised an extra £465m in provisions for bad conduct, including £390m for payment protection insurance and £75m for interest rate hedging products and fixed-rate tailored business loans to small businesses.

These provisions are covered by the £1.7bn set aside at the behest of the regulator ahead of independence.

Mr Duffy said £1.7bn would be enough to cover legacy issues and dismissed a claim by campaigners that an “avalanche” of legal claims from SMEs had forced Yorkshire and Clydesdale to delay the demerger and IPO until February.

He said the timetable was chosen for practical and common sense reasons. It was initially supposed to have completed in 2015.

Mr Duffy joined Yorkshire and Clydesdale in the summer after turning around the fortunes of Allied Irish Banks. He previously had a long career in international banking, including a decade at Goldman Sachs.

He plans to restore double-digit return on equity at the lenders and said he will be driving efficiency and growth in the business.

National Australia Bank missed market expectations with a 15.5 per cent rise in annual profit, with net interest margins slipping to a record low of 1.87 per cent due to stiff business lending competition.

“This company has been so distracted for so long. We can now see almost an end to that,” said group chief executive Andrew Thorburn, referring to the British exit.

“That is going to be so uplifting and enable consistent ongoing focus on our Australian New Zealand franchise.”

The UK business has been plagued by bad debts and misconduct charges.

Meanwhile, veteran stockbroker Keith Loudon hit out at Yorkshire Bank yesterday over the terms of its initial public offering.

The senior partner of Redmayne Bentley said: “Yorkshire investors will be delighted to learn that Yorkshire Bank will be coming to the stock market as an independent quoted company. Of the shares, 75 per cent will be very fairly offered to shareholders of NAB. The balance will be placed with institutional investors.

“What about local private investors who have all seen the name on the high street for a lifetime? They have been neglected. The bank should be looking after customers. They have let their home territory down.”

A spokesman for Yorkshire Bank declined to comment.