NAB set to sell off Yorkshire Bank

NATIONAL Australia Bank is preparing to sell Yorkshire and Clydesdale banks, The Yorkshire Post can reveal.

David Thorburn, CEO of Yorkshire Bank
David Thorburn, CEO of Yorkshire Bank

The Melbourne-based group is expected to outline plans to exit the UK when it announces full-year results on Thursday.

Andrew Thorburn, the new chief executive, will spell out the options, which will include an initial public offering.

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But he is unlikely to set out a detailed timetable at this stage, given the recent volatility in financial markets that has caused challenger banks Virgin Money and Aldermore to delay IPOs. Mr Thorburn – no relation to UK chief David Thorburn – wants to focus on NAB’s core businesses in Australia and New Zealand.

He has already announced plans to offload the group’s US subsidiary Great Western Bank via an IPO.

Insiders described Mr Thorburn, who took over from Cameron Clyne in August, as an “action man” and “a fast-moving guy”.

The prospect of an IPO raises the potential for a strong, standalone challenger bank in the UK with significant operations in Yorkshire and Scotland.

The Government has long complained about the lack of competition in the banking sector as an obstacle to growth.

Analysts say NAB has been “clearing the decks” for a UK exit for some time.

The group has carried out a deep restructuring exercise, including the axing of 1,400 jobs, and quarantined £5.6bn worth of troublesome commercial real estate loans.

It has invested in new technology platforms and a marketing campaign for its UK operations.

It has also beefed up the UK senior management team with some heavyweight appointments and introduced new corporate governance guidelines.

And it has made larger-than-expected provisions of more than £1.23bn in an effort to move on from past conduct issues.

In spite of the stock market jitters of past weeks, the UK has one of the best-performing economies in the Western world.

Investors in bank shares stand to benefit from an economic upturn as interest rates rise.

Keith Bowman, analyst at Hargreaves Lansdown, said the weekend’s stress tests by the European Central Bank had raised one or two questions about the European banking sector.

Results from Lloyds, Barclays, RBS and HSBC over the coming week should give a clearer idea of the outlook for the banking sector and the UK housing market, he added.

Mr Bowman said the TSB flotation went well, but noted that its shares have not “flown away” from the offer price.

Gary Greenwood, analyst at Shore Capital, said the results from the ECB tests should not materially change demand for UK banking shares.

Yorkshire and Clydesdale banks had an estimated book value of around £2.41bn at the start of the year. Australian investors, who have long complained that the UK acts a drag on group profitability, will be looking for a decent return. In a third quarter update in August, Yorkshire and Clydesdale banks reported continued strong growth in their mortgage book and a lower charge for bad and doubtful debts.

But their improving performance has been overshadowed by the legacy from the mis-selling of products to households and businesses.

David Thorburn, the UK CEO, said the company was making “very real progress” in building a better bank for customers.

Asked about Thursday’s announcement, a spokesman for Yorkshire and Clydesdale banks yesterday told The Yorkshire Post: “We don’t comment on speculation.”