NAB continues talks over sale of Lloyds’ branches

NAB is yet to make a bid and any offer will depend on whether the acquisition improves shareholder value.

NAB declined to comment on the Lloyds sell-off yesterday, but NAB’s chief executive Cameron Clyne has said in the past: “Our number one priority is to grow the business organically, but in this climate it is also only natural that we would look at other options available to us. This would however, be against strict financial criteria with our key focus to generate value for our shareholders.”

A source with knowledge of the sales process said: “NAB haven’t put their bid in yet but we expect them to.”

Lloyds is hoping to attract more bids by being flexible over the offer deadline. European regulators have ordered Lloyds to sell the branches as payback for being rescued by the Government in the credit crisis. Analysts say the branches could fetch £3bn.

Only a handful of players submitted expressions of interest in time for an initial, informal deadline of July 11.

It is understood that Virgin Money bid, as did new banking venture NBNK. There had been speculation NBNK might team up with NAB’s UK arm, but sources said NBNK’s bid is an independent one.

The Co-Operative Bank is also in the running although rumours that Clive Cowdery, founder of UK insurance consolidator Resolution, could bid are thought to be inaccurate.

All the companies involved declined to comment.

Lloyds is hoping to whittle down the first list of bidders to a shorter list of preferred candidates by the end of July. The costs of transferring the branches are likely to be far higher for Lloyds if it sells the branches to a start-up bank, which gives an edge to established rivals.

Virgin Money is also considering bids for Northern Rock, the bank fully nationalised during the crisis.

Virgin and NBNK would have to raise funds from their own investors to proceed with the Lloyds deal, and analysts say NAB could play a role by teaming up with one of them to provide financing.

“We remain of the view that NAB’s involvement in a successful Virgin or NBNK deal will be important in crossing major regulation, infrastructural or funding hurdles,” said Oriel Securities analyst Vivek Raja.

n UK Financial Investments, the body which manages the Government’s stakes in bailed-out banks, is to step up its focus on selling the holdings, even though regulatory changes look set to reduce their value.

UKFI chairman David Cooksey said UKFI is waiting for a regulatory overhaul of the banking sector, including reforms drawn up by the ICB, before recommending the start of a sale process.