National Australia Bank (NAB) announced on Wednesday a strategic review of its U.S. business after the latter suffered from high levels of bad debts.

NAB Chief Executive Cameron Clyne said the review is expected to be finished in three months.

He attributed the weak performance of its UK operations to subdued growth in the UK economy caused by the ongoing sovereign debt crisis in the eurozone and current austerity programme by the British government.

David Thorburn, who was appointed chief executive of NAB's Clydesdale and Yorkshire bank operations in the United Kingdom, said he would study how the lender's UK operations could become strong and sustainable.

Mr Thorburn did not rule out a sale, but acknowledged the need for a material change in the business, particularly getting the right mix and structure.

NAB has over 3000 branches and 2.7 million clients in the UK. It has attracted potential buyers such as NBNK - as new venture that lost in its bid to buy Lloyds Banking Group branches - but NAB has failed to attract an offer acceptable to its Australian parent firm.

Citigroup reported that NAB infused €1.5 billion in its UK operations including a €400 million transfer in January 2012 to meet new capital requirements and €130 million to reduce a pension fund deficit. Mr Thorburn pointed to the UK operation's commercial property division as the weakest unit and the retail arm as the strongest.

For its Australian operations, demand for loans at NAB remains weak. However, Mr Clyne assured employees of both UK and Australian operations that there would be no major job cuts in the bank which still logged a solid performance despite a challenging business environment.

NAB purchased Clydesdale in 1987 and Yorkshire in 1990. The bank has 8.500 employees in UK.

Mr Clyne disclosed that in most of the places where NAB operates, there are higher deposits and wholesale funding costs, softening credit growth and fragile economic conditions.

As a result, NAB registered a cash profit of $1.4 billion for the first quarter of its financial year, up from $1.3 billion compared to a year ago but short of analysts' expectations of $1.45 billion. News of the lower-than-anticipated cash profit caused NAB stocks to decline 4 per cent on Tuesday, the largest single-day stock fall for the lender since early November 2011.

The Sydney Morning Herald reports that since 2009, NAB profit per day which used to be below $12 million has grown to $15.2 million or a 27 per cent gain despite inflation. That is equivalent to $67,500 daily profit per capita in Australia compared to $54,000 per capita three years ago.

It is not just NAB's but the profitability of the big four is in question because of their resistance to pass in full to borrowers the Reserve Bank of Australia's (RBA) interest rate cuts despite their combined $25 billion profit in 2011.

ANZ Bank even hinted of a rate increase when it announces it lending rates on Friday despite the RBA's decision to retain the current overnight cash rate of 4.25 per cent.

NAB, however, assured its clients that it will offer the lowest mortgage rate among the big four.

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