The news that Yorkshire Bank is to undergo yet another revamp will come as little surprise to its staff.
The bank has a long history of reshuffles.
This time, under the guise of a strategic review, Yorkshire has warned it will have to take “tough decisions” and job losses are “inevitable”.
Owned by parent National Australia Bank (NAB), Yorkshire and sister bank Clydesdale, have become the least loved part of the Australian banking giant.
While Yorkshire and Clydesdale’s profit performance has been exemplary compared to other UK peers, they’re way below the core Australian business, which has been largely untouched by the worldwide credit crisis.
Yorkshire Bank’s chief executive David Thorburn said that everything is under review as the bank strives to cope with deteriorating economic conditions, a challenging outlook and an increase in bad debts.
“We need to change the shape of the business. Returns have suffered and that’s not acceptable to me or to shareholders,” he told the Yorkshire Post.
It’s tough talking.
It is not clear yet how many jobs will be axed from Yorkshire and sister bank Clydesdale’s 8,300 employees, of whom 2,000 are employed in Yorkshire.
When asked about redundancies, Mr Thorburn said: “Job losses are an inevitable consequence of something of this nature.”
Mr Thorburn implied there are unlikely to be any branch closures, which suggests that the job losses will affect backroom staff rather than branch employees.
The overhaul is expected to shrink the size of the UK operation and Mr Thorburn said that all parts of the business are under review.
This could mean the closure of some of the banks’ other businesses. These include corporate banking, small business lending, assets finance, invoice finance, acquisition finance and a credit card business.
Analysts have singled out commercial property as one of the areas most likely to get the chop.
The overhaul could also involve a reduction in back office, IT and support function staff, always the first casualty in any reshuffle.
So it looks like the likeliest outcome of this review will be to retrench to the core profitable retail banking business, focusing on bread and butter mortgages and savings products with a better online offering.
When asked about a sale of Yorkshire and Clydesdale, which has been rumoured for the past three years, Mr Thorburn declined to comment.
Last year there was speculation that NAB could sell its UK assets in a reverse takeover to new banking venture NBNK, which would in turn bid for the 630 Lloyds branches on sale.
But the talks faltered and the Lloyds branches are now being sold to Co-op Bank.
Analysts believe the UK banks are worth over £2.5bn, but said a disposal is unlikely in the current climate.
There’s no way NAB would get book value in these economic conditions.
But that doesn’t mean NAB won’t sell Yorkshire and Clydesdale when the time is right.
As Mark Joiner, NAB’s executive director of finance, made clear last year when he said NAB would prefer to own the UK assets, raise returns and exit a few years later or look at IPO options, the Aussies have no particular affection for the 152-year-old Yorkshire institution.
This is all about making money for NAB’s Australian shareholders.
The bank hopes the news of a strategic review will appease its investors Down Under that it is doing something to sort out what they see as the underperforming UK business.
In the meantime, once again Yorkshire and Clydesdale’s staff face a difficult three months ahead not knowing if their jobs are safe.
Activist investor Peter Gyllenhammar has a nose for a bargain, as investors in a number of small companies have seen to their peril in recent years.
He controversially bought Bradford-based fibres group Chapelthorpe last year in a £5.1m deal labelled “miserly” by one analyst. But Gyllenhammar makes no apologies for his strategy of buying shares in lowly-valued industrial companies.
Lately he’s amassed a 20 per cent stake in Doncaster-based coal miner ATH Resources.
Interestingly, ATH’s finance director, Andy Weatherstone, was FD of Chapelthorpe until Gyllenhammar’s acquisition – although Blackfriar is assured this is simply coincidence.
ATH looks an undervalued business, with a market cap of just £13m after a year of poor geology and soaring costs.
But coal mining is a notoriously volatile business, subject to high costs and twitchy markets. Other miners have toyed with buying ATH but decided against it.
Blackfriar can’t believe outright acquisition is on Gyllenhammar’s mind. Turning around a textiles manufacturer is one thing, but a coal miner is quite another.