Clydesdale and Yorkshire banks focus on bad debts

The lenders said they had achieved their target for gross lending to businesses ahead of schedule

The Clydesdale and Yorkshire banks have warned economic turbulence is making bad and doubtful debts a key focus.

A trading update from the lenders said UK operations would retain a "conservative and prudent" approach in response to renewed economic turmoil.

They also said they had achieved a two-year target for gross lending of £10bn to businesses and mortgage customers, three months ahead of schedule.

The banks are run from Glasgow and are part of National Australia Bank (NAB).

David Thorburn, in charge of UK operations, said bad and doubtful debt had fallen, but remained a key focus.

The ratio of overdue loan payments to gross lending fell from 3.44% to 3.27% between the end of March and the end of June.

And despite slack demand for credit, Clydesdale and Yorkshire banks claimed to have achieved higher growth in business and mortgage lending than the bank sector as a whole.

'Prudent' banking

The market update stated that "economic conditions in the UK and Europe continue to be very challenging, and credit demand continues to be subdued."

Mr Thorburn added: "The uncertain economic environment underscores the need for us to continue to pursue our strategy of conservative and prudent banking."

The trading statement from Mr Thorburn - accompanied by one from Cameron Clyne, the chief executive in Melbourne - made no mention of NAB interest in buying more than 600 branches of Lloyds Banking Group, which are now on the market.

Lloyds is understood to see NAB as the best buyer for the asset sale, forced on Lloyds by the European Commission to reduce its market share by divesting around 5% of Britain's retail banking.

NAB has declined to table a formal bid, but is keeping its options open.