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

National Australia Bank, which has owned 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 £2.9 billion, despite strong trading in its core business.

The performance was hit by £823 million 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.

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

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.

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