Yorkshire Bank's float held as ratings agency poses new questions

CYBG PLC is expected to complete its initial public offering today, a day later than planned after a ratings agency made a last minute request for information about the lender's creditworthiness.
Yorkshire BankYorkshire Bank
Yorkshire Bank

National Australia Bank said the outcome could be a ratings downgrade for the newly independent company that owns the Yorkshire and Clydesdale banking brands.

NAB said the demerger became effective today and the IPO is expected to proceed this morning with strong demand from international and Australian investors for shares priced at 180p each.

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This will give CYBG a market valuation of £1.6bn, a figure at the lower end of expectations.

David Duffy, chief executive at CYBG, said: “I am delighted that NAB has today confirmed the demerger and that the IPO is expected to proceed.

“While we have a very short delay in launching the IPO it is very important that we commence trading as an independent company in the best possible way.

“We have made excellent progress with the transaction and we have very strong interest in our story.”

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In a technically worded announcement to the Australian Stock Exchange, NAB said CYBG received a recent specific request from one of the ratings agencies for certain financial information relating to its assessment of short and or long term deposit rating.

NAB added that the deposit rating is used by certain secured funding programmes, which represent 13 per cent of CYBG’s total funding.

It said the agency’s asseessment could lead to a near-term downgrade of the short and or long term deposit rating or the placing of such rating on credit watch with negative implications.

NAB said CYBG is expected to have a senior standalone investment grade rating and it does not anticipate any downgrade to have any material impact on its ability to raqise funding, the overall cost of funding or the financial outlook for CYBG.

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NAB said any downgrade would require CYBG to take mitigating actions in relation to its existing secured funding programmes.

Redmayne-Bentley, the independent stockbroker, welcomed the independence of CYBG, which has its registered office in Leeds.

Keith Loudon OBE, senior partner, said: “A sound regional bank is always good news for its region. For the Northern Powerhouse to have a finance facility not tied to London’s coat tails is a real plus.

“Yorkshire Bank has a great long-term profile in our area. I am sure they will build on this foundation.”

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Naeem Siddique, investment manager at the Leeds-based firm, said: “The impending float brings further listed competition to the once untouchable incumbents of the British banking industry...

“The float will value (CYBG) as the largest of the challenger banks and possibly pose the greatest threat to the incumbents.”

A spokesman for National Australia Bank declined to identify the ratings agency and would not comment further on today’s statement.