Clydesdale and Yorkshire Banks face higher 'redress' costs
Clydesdale Bank and Yorkshire Bank are facing increased costs for mis-selling of financial products.
Their Australian parent bank reported that improved earnings and lower bad debt provision were offset by the higher cost of "conduct and redress".
National Australia Bank (NAB) said the commercial loan portfolio for its UK subsidiary was being reduced.
Since being taken over by the parent bank last October, the troubled lending book has fallen by £1.2bn to £4.4bn.
Clydesdale Bank is based in Glasgow and includes the Yorkshire Bank brand.
In its update for the April to June quarter, NAB stated: "UK banking cash earnings were broadly stable in the quarter.
"Higher income and a lower charge for bad and doubtful debts were offset by an increase in expenses largely related to further provisions raised for conduct and redress matters."
No figure was given, but by its half-year figures, up to March, it had set aside £83m for mis-selling of payment protection insurance and of interest rate derivatives to business customers.
The April to June update stated: "Consistent with past disclosures, there remains a wide range of uncertain factors that are relevant to determining losses incurred in relation to these conduct and redress matters."
The UK operation has been seen as weighing heavily on the Melbourne-based bank, at a time when the strength of the Australian economy has helped its financial sector.
NAB chief executive Cameron Clyne said a lack of confidence in its core market had meant figures were subdued.
He commented: "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."