Mis-selling scandal lingers as bank returns to health

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Yorkshire bank has again had to increase the amount of money set aside to compensate the victims of mis-selling, counteracting the benefits of improved performance at the Australian-owned lenders.

Parent company National Australia Bank said higher income and lower charges for bad and doubtful debts in its UK business were offset by an increase in expenses in a third quarter trading update.

These were largely related to further provisions for “conduct and redress matters”, said NAB in a statement.

Yorkshire and its sister Clydesdale set aside £51m for mis-selling payment protection insurance and £83m for non-PPI claims, including controversial interest rate derivatives, in the first half of its financial year. They are among a dozen lenders taking part in a review by the City watchdog into the mis-selling of interest-rate hedging products to SMEs.

These were sold to protect against a rise in the cost of borrowing money during the boom years but left many holders dangerously exposed when interest rates fell to record lows.

In the three months to June, NAB revealed improved cash earnings in its UK commercial real estate portfolio with better loan performance and higher income.

The improved performance prompted renewed speculation about a sale of Yorkshire and Clydesdale banks, which analysts said could happen sooner rather than later.

NAB said the run-off of the portfolio continued ahead of plan with the balance declining to £4.4bn in June, down from £5bn in March, as loans reached maturity or customers moved elsewhere.

Yorkshire and Clydesdale transferred their £5.6bn commercial property loan book to their parent last October as part of a deep restructuring exercise, which also involves the shedding of 1,400 staff.

Cameron Clyne, chief executive of NAB, said: “In the UK, we continue to deliver against the strategy we outlined in April 2012. Progress on simplification of our UK banking business has been pleasing, with efficiency benefits ahead of plan.”

The group met forecasts with a seven per cent rise in profit.