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Yorkshire bank plans £2bn float

Clydesdale and Yorkshire, part of National Australia Bank, said it will save £5m by the branch closures Photo: PA Clydesdale and Yorkshire, part of National Australia Bank, said it will save £5m by the branch closures Photo: PA
Australian owner prepares listing for UK operations. National Australia Bank is preparing a £2bn-plus stockmarket float of its British operations next year, to end a nearly three-decade long attempt to crack the UK banking market after a succession of heavy losses.

The Australian lender has appointed Morgan Stanley, the investment bank, to lead a listing of Yorkshire and Clydesdale banks, and is expected to hire a handful of other banks to the advisory line-up in the coming weeks.

City sources said Macquarie, Credit Suisse and Bank of America Merrill Lynch were favourites to land senior roles on the listing.

The Australian banking group recently said that pulling out of the UK was “an absolute priority” and it was studying a “range of options” for the struggling division, which has been beset by a series of problems and high profile scandals.

The comments came after NAB posted a fall in annual profit following writedowns in Britain.

Yorkshire and Clydesdale, which have 2.7m customers and 330 branches, have been forced to write off billions of pounds of bad debts and compensate customers mis-sold payment protection insurance and complex interest rate derivatives.

They built up a large book of commercial real estate loans in the run-up to the financial crisis. In 2009 the portfolio was worth nearly £8bn, but after a series of writedowns, asset disposals and repayments, the value was cut to £2.2bn, according to NAB’s recent results.

The Australian lender has also taken a big hit on PPI and swaps mis-selling, forcing it to put aside more than £1.2bn in compensation.

Andrew Thorburn, NAB’s chief executive, recently said that the bank’s “clear focus” was on its domestic market and New Zealand. It would be treating the question of pulling out of Britain with “greater urgency”, he said.

NAB bought Clydesdale in 1987 and Yorkshire Bank three years later.

It is unclear how much NAB hopes the operations would be worth, but TSB, which went public just before the summer, currently trades on around 0.8 times its June book value.

If a similar multiply is applied to Yorkshire and Clydesdale, they could be valued at as much as £2.4bn - more than twice what NAB paid for the businesses.

However, floating its British subsidiary could prove tricky if markets remain choppy.

The stock exchange was primed for a flurry of bank listings this year, but not all have gone to plan.

Aldermore, one of several so-called “challenger banks” that have been created in recent years, cancelled its plans for a £900m debut in October amid turbulent markets.

Weeks later, Virgin Money postponed a £2bn listing until stock markets improved, eventually pushing ahead with the move but with its shares sold at the lower end of the expected range.

Some city sources think Yorkshire and Clydesdale are more likely to be bought by a rival such as TSB or Aldermore, both of which may need to be larger to compete with the big high street banks such as Lloyds or Barclays.

NAB has been preparing its UK exit for several years. It has carried out deep restructuring, axing 1,400 jobs, and hiving off £5.6bn worth of troublesome commercial real estate loans.

The bank has invested in new technology and a marketing campaign in the UK. It has also beefed up the UK senior management team with several heavyweight appointments and introduced new corporate governance guidelines.

Yorkshire and Clydesdale declined to comment.

Author: Ben Marlow
Source: The Telegraph


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