Two banks to quit commercial property lending

Two banks to quit commercial property lending


Bank funding lines are to begin their retreat out of commercial property lending following a strategic review of UK operations, according to reports yesterday by the BBC.

The parent company of the Clydesdale and Yorkshire banks, National Bank of Australia (NAB), has taken the decision to pull out of the UK commercial property market after a "significant downgrade in the growth prospects of the UK economy".

This may have a knock-on effect on the bridging market as Clydesdale Bank currently provides, and has previously provided, funding lines to some of the lenders in the sector, including Cheval Bridging Finance, Masthaven Bridging Finance and Tiuta Plc.

Despite the NAB’s UK operations making £77 million in profit in the last financial quarter of 2010, in the same period a year later losses of £25 million were reported by the media.


According to the BBC, one possible reason for the losses could have been the deterioration of commercial property loans, combined with the rising cost of funding which led to Clydesdale’s credit rating being downgraded last September.

In addition, it has been reported that in pulling out of UK commercial property lending, the banks will be shifting their focus to lending to consumers and SMEs predominantly in the north of England and Scotland. The restructuring is expected to cost £195 million but will save £74 million by 2015.

As a result of the restructuring, NAB has announced that by 2015 the Clydesdale and Yorkshire banks will be axing 1,400 jobs and closing 29 of the Banks’ 73 Financial Solution Centres. NAB’s UK operations workforce will be reduced from 8,300 to 6,900 - a cut which unions have described as "brutal".

Commenting on the decision, the National Bank of Australia told the media: "UK banking's risk appetite will be modified and will no longer accommodate financing of property development or property investment, where the underlying purpose is to generate rental income and capital gains."

The restructuring is currently awaiting approval from the Australian and UK financial regulators. 


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    The Yorkshire Bank simply cannot blame the downturn in the UK property market. It must take responsibilty of its own miss management. There are plenty of stories in the market place where its managers have been incompetent and impotent in making decisions which would cut the bank's losses. In addition, the OFT and the Banking Ombudsman need to take a closer look at the relationship between the principal insolvency advisor and the bank's recovery departments, which is believed to have been a root cause of the banks losses.

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