THE chief executive of Clydesdale Bank has said staff are excited at the prospect of an independent future and outlined how the branch network will remain a core part of its offering.

David Duffy, who joined Clydesdale at the start of June, is confident a stock market flotation will take place in early February next year.

That came as the bank reported cash earnings of £156 million in the 12 months to September 30, slightly behind the £158m in the prior year.

It cited costs related to the planned initial public offering as well as lower income after decisions to reduce fees related to personal current accounts.

Customer lending grew four per cent to £28.7 billion while deposits were up more than 10 per cent to £2.5bn.

Retail lending rose by £2bn in the year to £21.6bn with mortgage lending rising 11.5 per cent to £20.5bn.

While business lending dipped more than 11 per cent to £7.1bn Mr Duffy said that was a result of a planned exit from lower yielding deals and assets.

Although the bank cited subdued demand for credit from businesses Mr Duffy said he expects core SME lending to return to net growth over the current six month trading period.

He said: “In our markets, where we are today, there is a step-up in demand. Based on the order books we see, the kind of activity we see in the market place, we are seeing companies moving to invest in capital type machinery and in expansion of employment.

“It is the beginning of a trend we are seeing so we feel confident we will be able to participate in that with those customers.”

Clydesdale said the proposed initial public offering will see around 25 per cent of shares given to institutional investors and the remainder being taken by shareholders of its parent National Australia Bank.

Asked how much of the preparation work has been done ahead of the flotation Mr Duffy said: “We have a very, very organised capability and I am very confident everything needed will be in place.”

He went out to point out the bank’s IT structures and systems are already operating on a standalone basis.

Mr Duffy also knocked down rumours NAB was still considering a sale of Clydesdale.

He said: “There is no dual track process. We have one simple process.”

However he conceded that if “somebody comes along with a stunning, mind-blowing offer you would question why but you would have to consider it for your shareholder”.

According to Mr Duffy staff morale is improving the closer the flotation gets.

He said: “They are sitting in front of the customer and know how best to serve them. They now believe that for the first time in a very long time they will be able to control their destiny and deliver to the customer the way they want.

“There is a huge optimism that is not a normal part of financial analytics. It is about being released to go do what we need to do for the customers.”

Mr Duffy stopped short of guaranteeing there would be no branch closures or job reductions in the future and said “you can’t be absolute on that”.

However he was adamant a high street presence will continue to play a major part of Clydesdale’s offering.

He said: “People keep saying you need to improve costs so cut your branches and that is entirely the wrong analysis. What is the best model to deliver to customers services they want? Then go back and look at your branches.

“People think nobody goes to the branch anymore but I can tell you that SMEs go to the branch all day.”

Mr Duffy cited a new flagship branch in Leeds which combines corporate and retail banking. While another branch in that city is being closed the site there is being redeveloped into a 24/7 outlet offering various services such as cash withdrawal and cheque pay-in.

There is also a plan to introduce video conferencing facilities into all branches over the next two to three years in order to allow people to access banking experts, from mortgage advisors to industry sector managers, from wherever they are.

He added: “I view digital as a service to the customer. It is not instead of anything. Our intent is to create the best mobile, online and branch offering where a customer can start in any one of those and finish in any other.”

Clydesdale booked an additional £465m of conduct related provisions in the second half of its financial year.

Of that £390m is for payment protection insurance and £75 for complex business loan products. The provisions are covered by a £1.7bn guarantee which is being provided by NAB to support the IPO.