NAB sets D-Day for UK exit after ‘tortuous and expensive journey’

NAB is proposing the demerger of 75 per cent of Clydesdale and Yorkshire Bank Group (CYBG) to existing shareholders and the sale of 25 per cent to institutional investors via initial public offering.

The bank expects to raise around £500m through the IPO. It hopes to complete the transaction on February 8.

David Duffy, chief executive of CYBG, said: “This is another important step towards becoming independent for our Clydesdale and Yorkshire Bank brands.

“We will be able to shape our own strategy, build a better bank for our customers, and deliver long-term and sustainable growth for our shareholders.

“We already have a strong customer franchise and now we have a great opportunity to challenge the market with enhanced products and outstanding customer service.”

NAB directors have given their unanimous backing to the proposal arguing that the demerger is in the best interests of shareholders.

Grant Samuel, a corporate advisory firm hired by NAB to carry out an independent review, also backed the proposal.

The new entity is expected to have its primary listing on the London Stock Exchange.

Financial instruments known as Chess Depositary Interests will also be traded on the Australian Securities Exchange.

NAB has called a scheme meeting and general meeting for January 27 to approve the demerger. The transaction remains conditional on court, shareholder and final regulatory approvals.

David Ellis, a Sydney-based analyst at Morningstar, said: “We endorse the action of the board and CEO Andrew Thorburn in exiting the United Kingdom, and we are pleased that the end is finally in sight, as it has been a tortuous and expensive journey for NAB shareholders.

“NAB shareholders have waited a long time for the UK exit, and should be rewarded with higher returns on the more profitable Australian and New Zealand banking franchise.”

Australian commentators have long blamed Yorkshire and Clydesdale for acting as a drag on NAB’s earnings, variously describing the UK operations as “a major blight”, “a nightmare” and “an albatross”.

The group published a 580-page scheme booklet today, detailing the timetable, the demerger and its impact on both NAB and CYBG as institutions.

The report by Grant Samuel revealed that NAB held discussions with various potential acquirers for the Yorkshire and Clydesdale brands and remained open to a trade sale until the final decision was made on the proposal to demerge and IPO.

The report also revealed that NAB ruled out a full IPO of £2bn as “extremely challenging” in current markets and noted that such a fundraising would probably require a “more exciting” story.

Grant Samuel warned that costs from bad conduct would continue to haunt CYBG for several years. City regulators have forced NAB to set aside £1.7bn in provisions to compensate households and businesses for the mis-selling of products.

Michael Charney, chairman of NAB, said having assessed a number of alternatives, the board considers the demerger and IPO the best exit option.

He added: “In recent years, NAB has taken a number of steps and initiatives to strengthen CYBG’s standalone position.”

The Australian lender pumped three separate capital injections into the lender between 2008 and 2012 totalling £1.487bn.