("Aussie Bank Cuts 1,400 UK Jobs," at 0140 GMT, misstated the
value of the impairment charge in the 12th paragraph. The correct
version follows:)
SYDNEY--One of Australia's biggest lenders said it will slash
1,400 jobs from its struggling U.K. operations in a further blow to
Europe's third-biggest economy which has just tipped back into
recession.
National Australia Bank Ltd. (NAB.AU) on Monday cited a
deteriorating U.K. economy as it announced writedowns of GBP456
million ($742.1 million) at its Clydesdale and Yorkshire
operations.
The job cuts and writedowns are part of a U.K. strategic review
by the Australian lender, which has resulted in a narrowing of its
focus onto retail and small-business lending in Scotland and
Northern England. Most of its British commercial-real-estate
portfolio will be transferred to National Australia Bank's balance
sheet, and no more such loans will be written, the company
said.
Chief Executive Cameron Clyne said there has been "a significant
downgrade" in the growth prospects of the U.K. economy in the last
six months.
"In addition, the commercial-property market, which had
previously seen signs of recovery, has recently experienced a
'double dip' as the recovery stalls and other banks accelerate the
reduction in their commercial-real-estate exposures," Mr, Clyne
added.
The U.K. economy contracted by 0.2% in the first quarter of
2012, official data showed last week, as European governments
struggle to maintain growth while trying to trim massive budget
deficits inflated by bank bailouts during the global financial
crisis. That followed a 0.3% contraction in the final quarter of
2011.
Two consecutive quarters of contraction is the standard
definition of a technical recession.
Royal Bank of Scotland Group PLC (RBS) Chief Executive Stephen
Hester warned last week that regulatory changes combined with the
gloomy U.K. economic outlook could continue to weigh on the
government-controlled bank's share price.
"Our shareholders, indeed all bank shareholders, will see value
recover less well than hoped for," Hester said.
Acquired by Australia's fourth-largest lender by market value
over two decades ago, the Clydesdale and Yorkshire banks have
become a blight on its earnings.
National Australia Bank has said its U.K. operations need more
scale to compete in the mature British banking market, and it has
been mulling whether to sell the two banks or beef up its British
operations with acquisitions. It was in the running to acquire over
600 Lloyds branches last year but didn't submit a formal bid on
price concerns.
Melbourne-based National Australia Bank said it will incur
GBP195 million of restructuring costs, write off GBP141 million of
goodwill from Clydesdale Bank, and book an additional GBP120
million impairment charge due to increased protection insurance
claims.
It said the moves, which include a reduction of over 1,400
full-time positions by the 2015 financial year, are expected to
deliver annual cost savings of about GBP74 million.
James Ellis, a banking analyst at Credit Suisse, said the
outcome of the review isn't highly surprising and "in our view
quite sensible and pragmatic".
Ellis said the bank has created a pathway to a more sustainable
U.K. exposure and possible medium-term divestment, although he
noted that it's still holding large risk exposures without
additional group provisions.
The bank on Monday reported an unaudited net profit for the six
months to March 31 of 2.05 billion Australian dollars ($2.14
billion), which it said is 15.6% below the previous corresponding
period. Cash earnings--which smooth out one-off items--rose 5.7% to
A$2.82 billion, it said.
-By Ross Kelly, Dow Jones Newswires; 61-2-8272-4692;
Ross.Kelly@dowjones.com