THE Yorkshire and Clydesdale banks are being readied for a stock market flotation after their Australian owner confirmed plans to exit UK banking.

National Australia Bank (NAB), which has owned Glasgow-based Clydesdale since 1987 and Yorkshire since 1990, said it was considering a broad range of options for the banks, including a sale through public markets.

Chief executive Andrew Thorburn said the exit plan was an "absolute priority" for the group after it reported a 1.1 per cent drop in full-year profits to 5.3 billion Australian dollars (£2.9bn), despite strong trading in its core business.

The performance was hit by 1.5 billion Australian dollars (£823m) in one-off charges, including in UK banking to cover mis-sold payment protection insurance (PPI) and interest rate hedging products sold to small businesses.

The Yorkshire and Clydesdale business, which has about 7,100 UK staff and more than 300 branches, has long been the subject of sale speculation after it racked up hefty losses for NAB through property loans turned sour.

Virgin Money and Aldermore are also planning flotations but have been forced to delay their listing moves because of recent stock market volatility.

Earlier this month, NAB said redress for PPI would amount to £420m in the financial year - up from £75m forecast in August - because a new complaints-handling process led to increased payments.

It has extended its examination of historical records dating back to pre-2000 periods, which includes the use of unindexed microfiche records.

The company also reported higher-than-expected levels of new complaints and warned that Clydesdale is still subject to an enforcement action with the City regulator in relation to its previous PPI complaints-handling process.

David Thorburn, chief executive of the Clydesdale and Yorkshire, said the two banks were now well placed for "sustainable growth" after an efficiency drive and sharpening in their product competitiveness.

He said: "Clydesdale and Yorkshire Banks are strong brands with good market shares in the communities in which we operate."

Underlying profits for the banks rose 6.8 per cent to £283m, with the charge to cover bad debts down by 49.4 per cent, or £78m, to £80m, as a result of a more stable UK economy and drive to improve asset quality.