The owner of the Clydesdale and Yorkshire banks has revealed a big jump in charges to cover the mis-selling of financial products such as PPI.

National Australia Bank (NAB) said redress for payment protection insurance will amount to £420 million in the financial year to last month, up from the £75 million forecast in August. It is also taking a £250 million hit in relation to interest rate hedging products, which were sold to small businesses.

The charges mean that NAB's full-year earnings will be around 14% lower, despite steady trading in core operations in Australia and New Zealand.

The increased PPI provision reflects a new complaints handling process, which is leading to increased payments both for new complaints and in revisiting closed complaints.

It has also 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.

The provision for interest rate hedging products is higher than the £170 million announced in August and stems from progress with its reviews of tailored business loans and derivative products.

The latest provisions take the total running total costs for the two matters to more than £1.2 billion.

NAB said: "Dealing with conduct matters continues to be a significant and ongoing issue for the UK banking sector generally and there remains a wide range of uncertain factors relevant to determining the total costs associated with conduct related matters, including any possible fines.

"The increased conduct provisions are adequate and appropriate based on the information available to us today as part of our year end review and financial close process."

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.

David Thorburn, chief executive of Clydesdale and Yorkshire Banks, said: "While it's disappointing to have announced significant provisions for the legacy conduct issues we signalled in August, very real progress is being made in driving forward our clear commitment to fairness and investing in building a better bank for customers."