Peter Edwards: NAB UK needs to embrace future by splashing the cash

More than two decades after the film turned Michael J Fox into a star, it is recognised as a classic so I snapped up the DVD version because I didn’t know if it would be another 20 years before I saw it on sale again.

Seeing the DVD going spare got me thinking about what else has been up for grabs, however, and my mind made the short leap to Lloyds Banking Group and its decision to speed up the sale of 600 retail branches, which the EU is forcing it to sell after its bail-out and takeover of Lloyds.

Perhaps Lynne Peacock had the same thoughts about hitting the sales. The chief executive of National Australia Bank UK, which includes Yorkshire and Clydesdale Banks, is believed to be interested in bidding for the Lloyds assets, which could be made up of 19 per cent of its mortgage book, a share of UK current accounts, the TSB brand and Intelligent Finance in a £3bn firesale.

NAB is quietly considering its options and saying little more publicly, as it strives for greater organic growth, but if it is going to take the long-awaited plunge into expansion, then Ms Peacock won’t have too long to think about it. Antonio Horta-Osorio, the new chief executive of Lloyds, opened the sale sooner than expected earlier this month even as the Independent Commission on Banking investigates the industry.

For Ms Peacock, however, it could be a case of now or never. Yorkshire Bank has long been seen as a cautious and traditional institution.

There’s nothing wrong with that, when you consider how extravagance wrecked the fortunes of its larger rivals, but NAB has long pondered whether to sell or expand its British businesses, which is why it tried to buy the network of 318 branches sold in similar circumstances by Royal Bank of Scotland last year.

If it is ever to realise its ambitions, then it must take the plunge now, before conditions become more hostile to a deal. NAB UK has money to spend, with Yorkshire and Clydesdale banks having grown pre-tax profits by 53 per cent to £164m in the 12 months to September 2010, despite Britain’s faltering economic recovery.

Meanwhile Lloyds’ own concerns – a slow climb out of the red, the years it will take to repay its taxpayer loan, a boardroom shake-up and Mr Horta-Osorio’s desire for a quick sale of the branches – means it is in a weak bargaining position.

And with Northern Rock’s woes continuing last week, when the “good” half of the bank reported a less than brilliant £230m annual loss, the taxpayer’s other bank holdings will not be sold off any time soon.

Over all of this looms the Independent Commission on Banking, set up to examine the level of competition in the sector. It is not due to report its findings until September but, as debate rages over whether it will dare to suggest breaking up the major banks, there is one thing you can bet on, that mergers and acquisitions will only get harder.

For Yorkshire Bank, the only real unknown is the state of the economy. It will have already spent many hours war-gaming all the outcomes, however, so it will not be taken by surprise. It should not hold too many fears for the performance of Lloyds’ branches, however, because it was not the retail arm but a series of fantasy-land property ventures that forced it to go cap-in-hand to the taxpayer.

A deal could also please NAB investors, who have seen Yorkshire and Clydesdale as a bit of a drag on the Australian businesses. NAB UK, which has 330 branches and a few dozen financial solutions centres split between its two brands, would be propelled into the big time by a deal, which could be backed by private equity. It could even lead to a flotation for the expanded group, allowing the Aussies to remove themselves from what the Sydney Morning Herald rather sniffily called “two decades of suboptimal performance in the UK”.

So Ms Peacock, it is time to do as I did in the supermarket and splash the cash before it is too late. Other likely suitors for the Lloyds branches, such as Virgin Money and Tesco Bank, are not going to hang around.

The moral of Back to the Future, when the mild-mannered Marty gets stuck in the past and has to overcome a larger and risk-taking rival so his parents can become a couple, is to be unerringly bold. The result, of course, is love, happiness and perpetual prosperity.