The decision followed a strategic review of NAB’s UK operations.
The banks will pull out of commercial property lending and focus on consumer and small business lending in the North of England and Scotland.
NAB said the decision was taken after a “significant downgrade in the growth prospects of the UK economy”.
The shrinking of the banks will involve the shutdown of 29 of the banks’ 73 “Financial Solution Centres” which offer services to businesses and high net worth individual investors. Nine other centres will be merged with other local retail branches.
NAB said the changes would mainly affect operations in the South of England.
Six back office locations will also be shut. The restructuring will cut the workforce of NAB’s UK operations down from 8,300 to 6,900.
The move still needs to be approved by both the Australian and UK financial regulators before it can go ahead.
Clydesdale and Yorkshire banks racked up a £25m loss in the first half of the year compared with a £77m profit in the previous year, reflecting a higher charge on bad debts and higher funding costs.
The bank said it expected the closure and restricting would cost about £195m but would save about £74m a year by 2015.
Cameron Clyne, chief executive at NAB, said: “In the last half-year there has been a significant downgrade in the growth prospects of the UK economy, in part reflecting the drag on its recovery from heightened weakness in the eurozone.
“The action we are taking is needed to adapt to this current economic environment in the UK, and to reposition the UK banking business to improve returns for the group over the medium term.
“While every effort will be made to support our people, the substantive repositioning of the business will impact roles in the UK.”
David Fleming, national officer at trade union Unite, said: “The announcement today by National Australia Group is nothing short of brutal for the UK workforce.
“Unite finds it disgusting that the company decided to release a statement from Australia in the middle of the night so UK staff across Yorkshire and Clydesdale banks would wake up to hear that their jobs are being cut through the morning news reports. This is not the behaviour of a responsible or credible organisation.”
