Yorkshire Bank owner denies any ‘fire sale’ of its UK assets

Recent reports claimed NAB, which owns about 340 Yorkshire and Clydesdale Bank branches in the UK, could sell them to a new banking outfit.

Lord Levene’s new vehicle NBNK Investments has been talking with NAB about buying Yorkshire and Clydesdale banks via a reverse takeover.

NBNK could seek to wrap them up with the 632 Lloyds branches being auctioned off, creating one of the UK’s biggest high street banks.

But Mark Joiner, NAB’s executive director for finance, said there is no need for a “fire sale” of its UK assets.

“The UK business does not lose money,” he said. “The market is at the bottom and so is the (pound) sterling.

“It is a rotten time to sell. There will be no fire sale.”

Mr Joiner added the bank did not need to free up capital and would not take a big writedown.

He said NAB’s preferred strategy is, for the time being, to hold onto its portfolio of 187 Yorkshire Bank branches, 152 Clydesdales and 73 business and private banking centres.

“We would prefer to own the asset, raise the returns and exit a few years later, or IPO it... there are options,” he said.

NAB has been under constant pressure to either sell or beef up its UK operations. The combined Yorkshire and Clydesdale business has a two to three per cent market share, but is a drag on the group’s overall returns.

They have a single digit return on equity (ROE) compared with 16 per cent for the group. Mr Joiner said the UK business was heading towards double digit ROE in the low teens.

NAB is understood to have looked closely at the Lloyds branches, as well as last year toying with buying 318 Royal Bank of Scotland branches, which were eventually sold to Santander.

Lloyds is being forced to sell the 632 branches in order to get the European Commission’s seal of approval for its takeover of Halifax Bank of Scotland in 2009 at the height of the banking crisis.

The Lloyds branches on their own would create Britain’s seventh-biggest bank or building society, with a 4.6 per cent share of the current account market.

But Mr Joiner ruled out a bid for the branches, despite speculation the UK’s biggest lender is sweetening the terms, such as cutting the size of the loan book a buyer would acquire.

“Why do we need to bias our capital to the UK when the economy is expected to be on its knees for 10 years or so?” he said. “There are growth opportunities in Australia.

“The fact that they (Lloyds) sweeten the deal does not change anything for us.”

Mr Joiner said NAB was focused on growth in Australia where it is trying to stem stock market under-performance by growing market share in mortgages and extending its share of business loans by offering low rates.

Figures showed the bank grew home loans in Australia at nearly three times that of the industry as a whole in the last 12 months, and Mr Joiner said its distribution will help it grow market share.

However, this aggressive mortgage growth has widened NAB’s funding gap to nearly 30bn Australian dollars from 25bn a year ago.

Yorkshire Bank, led by new chief executive David Thorburn, has repeatedly stressed its focus is on organic growth, rather than acquisitions. Together with Clydesdale, the bank, which has a financial year end of September 30, grew pre-tax profits by 25 per cent to £101m in the six months to the end of March.

It also advanced £3.3bn of new lending during the first six months of its financial year, putting it firmly on course to meet its pledge to lend £10bn of new mortgage and business lending in the two years to October.

By the end of March retail deposits had increased by £900m or four per cent on a year earlier to £23.4bn.

However, deposits were down by about £300m on the prior six months, which the bank blamed on fierce competition and low demand for loans.

The bank also kept its rate of mortgages three or more months in arrears flat at 0.76 per cent.

Lloyds launches loans offering

Part-nationalised Lloyds Banking Group has launched the sale of a portfolio of commercial property loans worth £1bn, according to reports.

The property loan sale is being handled by investment bank JP Morgan Cazenove and is part of Lloyds’ ongoing moves to shed non-core assets and restructure its balance sheet.

Lloyds had said in August that it had sold £1.8bn worth of property loans in the first half of 2011.

Lloyds has been dogged by a legacy of bad debts from its Government-brokered acquisition of troubled rival HBOS during the credit crisis.

The Government had to rescue both it and rival Royal Bank of Scotland with taxpayer bailouts.